Fed faces existential crisis as gold prices spike

In the United States, gold has experienced a significant price surge, climbing over 60% since mid-2023. This increase has coincided with a period during which the Federal Reserve has claimed to tackle inflation through interest rate hikes. However, many experts argue that the central bank’s policies are misguided and fail to address the root causes of inflation, particularly monetary inflation, which results from an excess of currency supply and devaluation of the dollar. As a result, the price of gold, a long-standing indicator of currency health, signals future economic challenges ahead. Historically, gold has maintained its intrinsic value across millennia, serving as a gauge for currency worth rather than the metal's own valuation. Observers note that the Federal Reserve’s dismissal of gold in monetary policy decisions suggests a fundamental misunderstanding of economic indicators. Prior to the COVID-19 pandemic, the price of gold rose from $1,200 in late 2018 to around $2,000 by early 2020, reflecting existing monetary inflation exacerbated by global lockdowns. As the Fed continues its course, the rising gold price warns of potential inflationary pressures that could intensify if the current trajectory is maintained. The failure to account for options outside monetary adjustments, such as the impact of a weakening dollar and non-monetary price changes, has led to skepticism regarding the effectiveness of interest rate hikes in managing inflation. The current economic landscape necessitates a reevaluation of tactics employed by the Federal Reserve, especially in light of warning signs from the gold market which indicate growing inflation concerns. With the central bank facing pressure from its own policies, the implications of these shifts in gold prices are profound, hinting at an imminent economic crisis if corrective action is not taken promptly.