Peak anxiety has yet to arrive

The Dollar gold price looked like slipping below $3,100/oz last week. It's now back above $3,300/oz, a rise so far this week of more than 2.5%, in just one week! If gold moves up and down according (in part) to how anxious the world feels, then this week is feeling a trifle more stressful. The gold price obviously moves according to buyers, and buyers tend to make their decisions on sentiment. Less anxious tends to mean less buying.

How worried do you feel? Leaving aside the stalemate in the Ukraine war and the slaughter happening in Gaza, there are plenty of other reasons to be nervous, and not all of them military.

Since 1991 cash - whether in a bank account or under a mattress - has often been trash, as the interest rates offered by banks have often failed to outstrip inflation. The US has experienced an annual average inflation rate of 2.54% since 1991, a cumulative rate of about 143%. A $100 steak dinner in 1991 would set you back $243 today. Let's say you went out in London for dinner in 1991 and spent £100; today the same dinner would cost you £274. UK inflation has averaged more than 3%/year since 1991, a cumulative rate of more than 174%. Britain's Pound has lost 64% of its value since 1991; today's Dollar has about half the purchasing power of that in 1991.

Pax Americana no longer

For the past 80 years the world has lived under Pax Americana or 'American Peace', a period of relative global peace supervised and often enforced bloodily by the US. With that political-military hegemony came the dominance of the Dollar in international finance, a hegemony that has been slipping for decades.

American economic liberalism in the years after 1945 tried to combine economic stability with welfare state measures, with unfettered trade at its heart. Those days are now gone and the free exchange of goods, capital and technology is no longer seen as a positive wealth-generator.

America has weaponized its economy, no doubt for good reasons, as the rise in the use of sanctions clearly shows. The chart below shows that sanctions use by the US federal agency the Office of Foreign Assets Control (OFAC) has risen almost 1,000% in the last 25 years. The rise (slowly for now) of the BRICS (Brazil, Russia, India China and South Africa) bloc indicates that a big percentage of the world no longer likes using the Dollar for trade; the world is no longer unipolar, is no longer American.

Insecurity and ramparts

The ratings' agency Moody's has downgraded US debt from triple A to Aa1. On one level such a small adjustment is meaningless; it merely brings Moody's into line with other ratings agencies. But on another, long-term borrowing costs rose in the US; the federal government's interest bill went higher; and trust in the US dropped a tiny bit.

Given that the non-partisan Committee for a Responsible Federal Budget anticipates the federal Budget Bill inching its way through Congress could add some $5 trillion to the national debt - now well on its way to $37 trillion (£27.55 trillion) - over the next decade it is becoming more difficult for the US to find buyers for its debt. And yet the US is still living on debt.

This at a time when it remains unclear whether stagflation - slow economic growth couple with higher than desired inflation - can be avoided. In the UK, growth continues to be sluggish, while inflation in April was 3.5%, higher than consensus expectations. In the US, the bellwether retailer Target's sales dropped in the first quarter of this year by 3.8% year-on-year as consumer sentiment weakened. Consumer's expectations of inflation one year from now rose to an astonishing 7.3%, according to the much-watched University of Michigan's index of consumer sentiment.

Gold is a better place for your assets than either fiat money or stocks. Since 1991, when the Soviet Union collapsed, the Dollar gold price has risen by more than 550%. In Pounds the increase is even bigger, more than 580%. From 1991 to the end of 2024 that's a return of more than 16%/year in Dollar terms, 17% in Pounds. The average return on the much more volatile S&P 500 index is about 11% over the same period.

Fortifications, ramparts, are slow to build and should last a long time, years rather than weeks. Gold is the best rampart you can build against the enemies of your finances, such as inflation or, worse, stagflation. It should be bought and held for the long-term; think in decades rather than days.

Although, thanks to Glint's Mastercard, you can use gold as e-money any time - perfect for picking up this week's groceries.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.