The U.S. Labor Department recently released August inflation numbers, showing that consumer prices rose 0.4% on the month. That’s an annualized rate of 3.8% and the ugliest pace since November 2008.
Meanwhile, in the wake of the Fed’s FOMC meeting last week and “Operation Twist,” some Federal Reserve officials have gone on the record expressing concern over the idea that we can find growth through policies that spark widespread inflation.
But you don’t have to look far to find signs that inflation is on the march. Just go to the gas pump or grocery store and you’ll see it in action. Your receipt will tell you the story just as well as these news items, as everything from gasoline to beef to vegetables are pricier these days.
Throw in the fact that wages are stagnant and the market is just shy of flat year to date in 2011, and the never-ending price creep is even more infuriating.
But don’t get mad at inflation. Get even.
A savvy investor can profit from the big inflationary trends right now and hopefully offset the damage caused by price increases — and then some. Here are three moves to make now to profit from inflationary pressures.
Buy Gold and/or Silver
You might think I’m about to say “gold is a terrific hedge against inflation.” Well, it’s not. Consider that the inflation-adjusted price of gold was about $1,850 in 1980 — then fell to about $350 in 2001. Clearly much more moves gold than inflation.
Plainly put, gold is a crisis hedge. That’s the biggest reason for the move into the metal now, and a big reason for the 1980 gold bubble (many market historians have correlated the beginning of a 1979 run in gold to the Soviet invasion of Afghanistan and the resulting global shock amid the Cold War). Inflation can be part of the economic mess at the time gold goes on a run, but it’s not the sole driver.
Silver has become gold’s cousin these days as a “safe haven.” With CDs and T-Notes yielding next to nothing and many folks scared of the stock market, these physical assets are in favor. Investments to consider along these lines include the physical gold and silver ETFs, the SPDR Gold Trust (NYSE:GLD), the iShares Gold Trust (NYSE:IAU) and the iShares Silver Trust (NYSE:SLV).
Don’t get into gold or silver because you think they are pure inflation hedges, however. They are not. But they are effective crisis hedges. Many folks think that no growth, stagnant wages and growing consumer prices equals a crisis — and rightly so.