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Global Inflation: Why It's Coming and What You Can Do

Tuesday, May 11, 2021

Since March, the US has been sending out $1400 cheques to adults as part of its $1.9tn stimulus package. It is no surprise, then, that data on personal income saw a sharp jump of 21.1% in March. However, what is surprising is how quickly inflation is turning up.

Compared to last year, the US inflation rate rose 2.3%, which is on top of a previous increase of 1.5% over the previous year. As shops and businesses slowly start to open once again, inflation will undoubtedly rise further.

Prices of everyday items have recovered since the first lockdown. The issue is, the US inflation rate will hit 2.8% YoY in the March to May period at a bare minimum — if prices don’t rise any further. That’s a big if.

However, it is possible that inflation will reach 3.5%, even 4% by the summer in the US. This is because numerous costs still need to work their way through the system and ultimately to the consumer, such as rising fuel costs. As vaccination programmes take place around the world and as countries eventually start reopening their economies for work and leisure, we can expect to see businesses raising their prices.

Inflation will most likely start its climb in the hospitality industry. This is because, with less competition and greater demand, pricing power is going to be strong. This industry will be keen to make up for a year of little to no sales, so sharp rises in costs can be expected.

Many other factors affect the national inflation level. In the UK, private rental prices rose by 1.3% in January ’21. And, with oil at a 13-month high, a full tank of diesel costs £69.56, which is £4.75 more than what it cost only five months ago.

The concern about the rise in global inflation centres on whether we will be able to manage it this time. Consider the US $900bn fiscal support package, followed by the $1.9tn package, followed by a potential $3tn package, in addition to the Federal Reserve’s purchasing of $120bn in financial assets every month, and that is only the US.

Meanwhile, in Europe, the EU’s long-term budget and NextGenerationEU, the temporary instrument designed to boost the recovery, will be the largest stimulus package ever financed in Europe, totalling €1.8 trillion.

Over in Asia, South Korea has announced a stimulus package of $333.7 billion; India, $332.9bn; Singapore, $85.7bn; Indonesia, $74.7bn; and the Philippines, $17bn.

This means that in addition to the now-routine monthly stimulus programmes by central banks, in addition to the quantitative easing, and all its other pseudonyms, which have been running non-stop for the last decade, governments around the world have now signed cheques to the tune of $9tn — and we are not even halfway through the year.

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If fuel bills have risen 7.32% within five months, what’s going to happen once businesses reopen and $9tn floods every high street around the world?

What compounds this situation further is that we still have a long way to go regarding the pandemic. With new strains popping up around the world, vaccine setbacks, and many unknowns, such as whether current vaccines will work against new and future strains, there is now a greater potential risk of higher inflation for longer than we previously thought.

Adding to this is the issue that some of these stimulus programmes are heavily front-loaded, especially the newest programme in the US, which promises everyone earning under $75,000 a cheque of $1,400. We are already expecting to see an increase in consumer demand as economies reopen, and giving everyone sizeable cheques is only going to fuel further spending, in turn, lengthening and exacerbating inflation.

Since Q3 2019, household cash and savings deposits have risen by $2.4tn, and credit card balances are at 4-year lows. There is a significant amount of money lying dormant in our economies, and future inflation levels will depend on when and how quickly that money is spent.

Personal consumption grew last month by 4.2%. We can only expect this number to grow each month as vaccination programmes roll out and governments around the world ease lockdown restrictions. Some economists think that it is only a matter of time before pent-up demand is released.

We all hope to see the global economy return to how things once were, or at least to some level of normality. However, the high levels of stimulus coupled with large piles of cash lurking in the economy are warnings. If you wish to protect your current and future spending power, then you should take action now.

Throughout history, one of the best ways people resisted inflation’s wealth-eroding effects has been by investing in gold and silver. This is because supplies of both precious metals are limited. While currencies can be printed to almost infinite quantities, devaluing all the notes in your back pocket along the way, gold and silver cannot — therefore their price increases.

Before the financial crisis in 2008, gold was around £300 per ounce, and since then gold has been on its steepest climb since records began. Quantitative easing and global crises pushed gold up to record levels over £1,450 in late 2020, see the live gold price here, an almost five-fold jump in just over 10 years.

With unprecedented levels of fiscal stimulus being pumped into the global economy and an uncertain economic outlook, where do you think gold will be in the next 10 years? If you would like to protect your wealth and make inflation work for you, rather than against you, then invest in gold or silver.

At The Gold Bullion Co., we offer market-leading prices for all our bullion. With bullion coins and bars from fractions of an ounce to multiple kilos, we’ve got something to suit your budget — invest now.

What is The Gold-Silver Ratio?

Thursday, May 6, 2021

In this guide, you will learn what the gold-silver ratio is, how to calculate it, and how you can use it to identify investing opportunities.

The gold-silver ratio, also known as the mint ratio, is a metric used to compare the price of gold to the price of silver. It shows you how many ounces of silver you need to buy one ounce of gold.

Traders and investors frequently use the ratio because over the years there have been normal ranges for the ratio, meaning there may be buying or selling opportunities when the ratio is outside the typical range.

Figuring out the ratio is simple. We just compare the price of gold to silver. For example, if the price of gold is £500 and the price of silver is £10, then the ratio is 50:1, or if gold is £1000 and silver is £50, then the ratio is 20:1

History of the Gold/Silver Ratio

In modern times, the gold to silver ratio constantly changes. This is because it is based on the prices of gold and silver, two metals that are used in industry and jewellery, and they are both regularly traded throughout the economic cycle. You can view the latest silver price chart or take a look at the live gold price.

Changes in the ratio also happen because of gold and silver price swings. These swings have become more common over the decades. However, in the past, the gold-silver price ratio was very consistent.

Part of the stability came from governments, which set a particular ratio as part of their economic policies. The range was between 12:1 and 15:1. This range even goes as far back as Roman times, when the typical ratio was 12:1.

In the 19th century, many countries used a bi-metallic monetary system. In this system, a country’s monetary unit was based on the gold/silver ratio. However, by the end of the 20th century, countries left the gold standard, and the prices of gold and silver traded independently in the free market.

A short history of the gold-silver ratio:

Period Ratio  
Roman Empire 12:1 The Roman Empire first officially set the ratio at 12:1.
1492-1834 15:1 The ratio stayed around 15:1 in Europe
1792-1834 15:1 The U.S. had a bimetallic standard of 15:1
1834-1862   US Congress changed its official ratio to 16.3
1980 16:1 During 1980, the ratio briefly hit historic norms.
1991 100:1 Silver hit historic lows, pushing the ratio up 100:1
2020 114:1 Last year, the ratio peaked at 114:1

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What Should The Gold-Silver Ratio Be?

Some argue that the past gold-silver ratios give us a rough estimate of what the ratio should be today. Since the time of the Egyptians, and until only a few decades ago, the ratio has ranged between 12:1 and 16:1. So there are thousands of years precedent to expect a ratio at or close to this range. Today, with gold priced at $1771 per ounce and silver priced at $26 per ounce, the current ratio is roughly 68:1, which is lower than last year’s peak, but still significantly higher than the historic norm.

An alternative way of deciding on a ratio for gold and silver is based on the actual quantity of gold and silver in the Earth’s crust. According to experts, there is 16 times more silver than gold. However, some believe the ratio should be even lower because silver is produced at a much higher rate than gold, leading to a faster depletion of the resource.

Many question why the ratio is so high in comparison to historical norms and even in comparison to the quantity of both metals in the Earth. Why has the ratio changed so much and so rapidly since the 1970s? Has global economics changed so drastically in the last four decades?

One major change that happened in the 1970s was the end of the Gold Standard. Until this time, the US Dollar was directly linked to the price of gold. Having currency linked to the gold price meant the government had to follow a certain amount of monetary discipline.

The discipline of the Gold Standard was due to governments needing to be sure they held enough gold in reserve for whenever someone wanted to exchange their currency for gold. If the government printed more money than it held in gold reserves, it risked causing hyperinflation or a financial crisis, shattering confidence in their currency.

Since the 1970s, governments and central banks around the world have been free to manage their monetary policies as they wish without any restrictions imposed by currency-gold links. This is likely the biggest change to take place throughout the history of the gold-silver ratio and is most likely the reason for the radical rise in the ratio and its volatility.

Trading the Gold-Silver Ratio and Investing Opportunities

The gold-silver ratio cannot predict the future, as with any financial metric, but it gives you a good indication of whether gold or silver is overvalued or undervalued. View the price of silver UK or have a look at the gold price today.

Over time, most market averages trace through normal ranges before careening off to extremes. It is during the extremes where opportunities exist, and these are the times to buy or to sell.

What this means is that a high gold-silver ratio could mean that silver is undervalued, and a low ratio could mean gold offers good value. Due to this, some investors buy silver when the ratio is high and buy gold when it is low.

One key strategy of successful bullion investors is accumulation. By switching between buying gold and silver depending on the movement in the ratio, you steadily build up quantities of both metals — and over time value builds in your portfolio.

Interested in Investing in Gold or Silver?

At The Gold Bullion Co., we offer market-leading prices for all our bullion. With bullion coins and bars from fractions of an ounce to multiple kilos, we have got something to suit your budget — invest now.

Operational Update

Friday, April 30, 2021

Early May Bank Holiday Office Closure

Our website will remain fully operational to accept orders throughout the Bank Holiday weekend.

Our offices will be closed from 1600 on Friday 30th April 2021 until we re-open at 0930 on Tuesday 4th May 2021.

Order dispatch will be suspended from 1400 on Friday 30th April 2021 until our offices re-open on Tuesday 4th May 2021.

We wish all of our customers a happy, peaceful and healthy Bank Holiday weekend.

We have reduced the potential delay in dispatch times for order down to 2 to 3 working days in most cases and we thank our customers for the patience and understanding shown during this problematic period.

Easter Holiday Office Closure

Our website will remain fully operational to accept orders throughout the Easter weekend.

Our offices will be closed from 1630 on Thursday 1st April 2021 until we re-open at 0930 on Tuesday 6th April 2021.

Order dispatch will be suspended from 1400 on Thursday 1st April 2021 until our offices re-open on Tuesday 6th April 2021.

We wish all of our customers a happy, peaceful and healthy Easter.

Monday, March 1st 2021

Unprecedented demand continues for physical precious metals and whilst we are delighted that so many customers, old and new, put their faith in us to supply their requirements, the sheer level of demand is continuing to cause delays in sending out orders.

All acknowledged orders are safely price locked and allocated to existing stock, or, where notified, to scheduled deliveries from our suppliers. Your orders are safe and will be supplied as quickly as we are physically able, but we ask for your patience and understanding during this period when it is taking longer than usual for us to ship orders.

We have re-assigned some staff members to our packing department and our team is working extended hours in a continuing effort to reduce delivery delays as far as possible.

Please assist us in our efforts by not calling in or emailing to request dispatch information as this takes staff members away from the primary task of getting goods shipped to our customers. Our system will send an email to confirm when an order has been shipped.

At present, we are managing to ship the vast majority of orders within seven days and will continue to make every effort to reduce these delays over the coming days and weeks.

Thank you to all of our customers for your continuing support and patience.

Monday, February 1st 2021

Since February 1st we have seen a huge increase in silver demand from our customers and increases in premiums from manufacturers and suppliers as global demand increases.

Over the last weekend we have received the equivalent of three weeks’ worth of orders in the space of 48 hours!

We would like to thank our customers, old and new, for their patience during these turbulent market conditions.

Our staff have acted quickly to secure additional stocks and to cater for the increased demand going forward.

It is our intention to dispatch all currently received orders in the next 7 – 14 working days.

All the products that are listed for sale are either in stock or on order from our suppliers, with a firm commitment date for delivery to us, giving customers the opportunity to lock in the current metal price at the time of order.

We would like to assure all our customers that we are working hard to dispatch orders with the least delay possible whilst social distancing and observing other measures that are in place to keep our staff safe.