Precious Metals Shine as Inflation Rises

Silver & Gold

As Burl Ives croons in his timeless holiday tune, “Silver and Gold, Silver and Gold, everyone wishes for silver and gold,” his words resonate more than ever this holiday season. The latest Consumer Price Index (CPI) report (2.7% & 3.3%) reminds us why these precious metals, long a hedge against inflation, are shining brighter than the star atop the Christmas tree. Gold is up a remarkable 32%, and silver, the metal of the people, is up an astounding 37%, outpacing even the meteoric rise of AI-powered stock indices.

This performance underscores a hard truth: inflation is eroding the purchasing power of the dollar faster than it has in decades. The CPI came in at 2.7%, and the core inflation rate is at 3.3%, bringing the cumulative inflation rate since 2020 to a staggering 22%. This marks the longest streak of inflation exceeding 2% since the stagflationary 1970s—a period etched in economic history as a warning of government overreach and monetary mismanagement.

The Root of the Problem: Government Deficits and Money Printing

Austrian economic principles teach us that inflation is not merely a rise in prices but a monetary phenomenon. When governments print trillions of dollars to finance deficits, as has occurred in recent years, the value of money diminishes. The Federal Reserve’s loose monetary policy (low rates) and Congress’s insatiable appetite for spending have ignited this inflationary fire, leaving ordinary Americans to bear the brunt this Christmas season.

The latest data paints a grim picture for households. Food prices have risen 4%, with essential categories like meat climbing nearly 5%,

and shelter costs—the largest component of household budgets—up a cumulative 40% since 2020.

Meanwhile, the prices of discretionary items like electronics are softening, reflecting a shift in consumer behavior. Americans are no longer buying everything; they are carefully selecting purchases, prioritizing needs over wants.

Yet, one category of spending remains resilient: services inflation, including restaurants and bars, shows no signs of slowing. This bifurcation in spending patterns highlights a troubling reality—while some sectors are cooling, the essentials continue to rise, squeezing household budgets further.

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