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Fears Over Rising Food Costs, Stagnant Wages Slam Markets

September 19, 2022

As rate hike fears drove heavy selling on Wall Street this week, precious metals investors are finding some silver lining amid the storm clouds.

Worse than expected inflation data has put a 75 basis-point rate increase firmly back on the table. Futures markets are now pricing in the possibility that the Federal Reserve will move by a full percentage point, though a three-quarters of a percent move is currently viewed as more likely.

Earlier in the month, investors had hoped that weakening economic data would cause central bankers to pivot away from their historically large interest rate hikes. But Tuesday’s Consumer Price Index report showed inflation is still raging.

The CPI came in at an annualized rate of 8.3%. Despite a drop in gas prices and weakness in most industrial commodities, retail costs for consumers continue to climb. Especially worrisome is persistently rising food costs.

Food prices have surged 11.4% over the past year, marking the biggest annual increase since 1979. A sub-index that measures price changes at the grocery store jumped by a whopping 13.5%.

Meanwhile, according to the Bureau of Labor Statistics, the average American worker is seeing only a 5.2% annualized bump in earnings. The purchasing power of wages, savings, and investments is getting clobbered at a staggering rate.

Unfortunately, none of the major asset classes have provided investors with a safe haven from the corrosive forces of inflation. Stocks, bonds, and yes, even precious metals are being dragged down.

On Thursday, gold prices broke below the $1,700 level to record a new low for the year. As of this Friday recording, the yellow metal trades at $1,666 an ounce and is down 3.4% for the week.

Metals investors who are looking for some silver lining amid the selling can find some positive divergences in the silver market. Silver prices continue to hold comfortably above their low point from earlier this month. The white metal is actually up 0.7% in this week’s trading to bring spot prices to $19.27 an ounce.

Platinum is also showing relative strength versus gold, up 0.9% since last Friday’s close to trade at $902. And finally, palladium shows a weekly loss of 2.9% to come in at $2,153 per ounce.

Volatility is inevitable in metals markets. Riding out downswings is the price investors must pay to enjoy the upswings that follow.

What investors must never risk is losing their actual, physical stake. Secure storage of your bullion is as important as the decision to obtain it in the first place.

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Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

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The world’s gold supply increases by 2,600 tons per year versus the U.S. steel production of 11,000 tons per hour.
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