According to Kitco, the current spot price of gold is (at the time of writing) US $3,339.30. Six months before, on November 25, 2024, it was $2.627.50. That's a difference of $711.80, or a rise of 27% in the spot gold price over a period of six months. Does that mean that gold is actually worth more, intrinsically? No. It means that the dollars normally used to buy and sell gold are worth that much less today than they were in November 2024. Gold hasn't gotten stronger - the dollar has become that much weaker.
There are many reasons to which the weakness of the dollar is usually attributed, but basically it's because there are too many dollars in circulation. It's a basic rule of inflation. Increase the money supply, and the price of goods purchased with that money rises, because there are more units of money chasing the same quantity of production. Milton Friedman explains.
Here's the US M2 money supply over the past ten years, from 2015 to 2025, according to US Federal Reserve data. Click the image for a larger view.
As you can see, the problem has been growing for a long time (decades, in fact). The weakness of the dollar isn't "President Trump's fault", as his political opponents would love to have us believe: it's the fault of all our administrations over the past half-century or so, as they've printed money (or allowed the Federal Reserve to print money) like there's no tomorrow. All those years of neglect and politically correct economic turning-a-blind-eye are now coming home to roost. In particular, the Biden administration's dollar-printing policies are now hitting the market, and making things much worse. See the Milton Friedman video above for the "delayed effect" of money printing.
This leads to a difficult question for you and I as we husband our rapidly depreciating dollars. Should we save them? If we can't get an interest rate equal to or higher than the actual rate of inflation (not the politically correct, watered-down "official" figures, but the reality, which is a lot higher - see, for example, ShadowStats or the Chapwood Index), then holding onto cash means that we're holding on to a diminishing asset. The more we hold, and the longer we hold it, the less it's worth. On the other hand, we have to hold at least some cash, because we've got to buy the necessities of life.
If we try to invest our cash in something of value today that will hold its value tomorrow, we again hit the dilemma that we have to be able to use our assets. If we're hungry, we can have all the gold coins we like in our safe, and all the blue-ribbon investments on the Stock Exchange that we like, but we can't eat any of them. If the price of car tires is going to go up by at least 50% over the next year due to tariffs and other issues, is it perhaps worth buying a set of replacement tires now, so that by the time we need them, we no longer have to find 50% more cash to buy them? What about food supplies? If we set aside long-term emergency food supplies, buying what we actually like to eat rather than tasteless emergency rations nobody enjoys, then in a pinch we can at least eat our food reserves when our monetary reserves are no longer large enough to buy everything we need.
There are no easy answers to these dilemmas, but we need to be thinking about them, and carefully watching the prices of what we buy every day, every week, every month. Each of us will have to make our own decisions about inflation-proofing our assets. For example, I'm in the process of buying a set of tires for each of our vehicles, because I expect their price to increase substantially over the next few months. If the price doesn't change, I won't have lost much except the "opportunity cost" of not having that money available to do other things. If the price shoots up, I'll have gained substantially. If the price drops . . . hey, who am I kidding? Price drops? Yeah, right! Deflation is not a likely prospect right now.
What else might we need that may end up in short supply and/or at much higher prices? Brake pads? Computers? Ammunition? Cosmetics? Medications? Each of us will have our own "essential lists", and we need to consider them in the light of inflation. If we fill them today at current prices, and they cost a lot more tomorrow, we'll come out ahead in the long run.
Food for thought.
Peter