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Did You Act on Our Inflation Hedge Article?

Gold and silver are soaring to new highs, proving their worth as powerful hedges against inflation. If you caught our recent post on commodities as an inflation shield, you might be patting yourself on the back right now. But if you didn’t act, don’t worry, this isn’t about chasing highs; it’s about understanding the bigger picture and positioning your portfolio for what’s next. With inflation heating up, as we predicted, let’s dive into why gold and silver are shining and what it means for your retirement strategy.

Inflation’s Rise and Commodities’ Surge

Back on July 23rd, in our post "Inflation and Retirement", we warned about rising inflation and highlighted assets like gold and silver to fade its impact. Fast forward to today, and the numbers don’t lie. A Consumer Price Index (CPI) report in July showed inflation holding steady at 2.7%, with expectations of further increases this month. Meanwhile, gold (tracked by the ETF GLD) has surged over 4% since July, and silver (tracked bythe ETF SLV) has climbed nearly 6%. Compare that to the S&P 500, which crawled along with a mere 0.6% gain in the same period.

Portfolios with exposure to gold and silver have clearly outperformed those tied solely to the S&P 500. But again, we’re not telling you to jump in and buy GLD or SLV at these peaks. Chasing highs is seldom a wise decision. Instead, let’s unpack why these commodities are rallying, why they belong in a diversified portfolio, and how you can prepare for what’s coming.

Why Gold and Silver Are Shining

The recent spike in gold and silver prices isn’t random. Several factors are driving their ascent:

• Inflation Pressures: The July CPI report confirmed inflation remains sticky at 2.7%, and market watchers expect another uptick this month. Gold and silver thrive when inflation erodes purchasing power, as they’re tangible assets with intrinsic value.

• Rate Cut Expectations: With the Federal Reserve eyeing a potential 25 basis point rate cut this month, the opportunity cost of holding non-yielding assets like gold decreases, boosting demand.

• Central Bank Buying: Central banks, especially in emerging markets, are stockpiling gold to diversify reserves, contributing an estimated 5% to gold’s performance this year. Silver’s demand is also spiking, driven by industrial use in solar energy.

These drivers align with what we outlined in our earlier post: commodities like gold and silver can protect against inflation’s bite.

Don’t Chase, but Don’t Ignore

We’re not saying to rush out and buy GLD or SLV at these elevated levels. Gold hit $3,528.45 per troy ounce on today, up 41.52% year-over-year, while silver reached $40 per ounce. Buying at the top risks a pullback, especially if profit-taking kicks in after these rallies.

However, our original advice still stands. Gold and silver have a place in a balanced portfolio. They’re not just inflation hedges; they offer diversification, as they’re uncorrelated with the stock market for the most part. The S&P 500’s 0.6% gain since July underscores its vulnerability to inflation. Meanwhile, portfolios with even a modest allocation to gold (5–10%) or silver (2–5%) have likely outperformed.

What’s Next for Inflation and Your Portfolio?

Looking ahead, inflation is expected to climb further. Analysts point to inflation headwinds from tariff, add in rate cuts, which influences spending, makes odds for higher inflation even more valid. A stronger dollar and higher yields may pose short-term headwinds for gold, but long-term demand from central banks and investors seeking stability should keep prices supported. Silver’s industrial demand, particularly in solar, adds another layer of upside potential.

Monitor and manage your portfolio:

• Reassess Allocations: If you don’t hold gold or silver, consider a small allocation during dips in price. Avoid overbuying at current highs.

• Diversify Strategically: Combine commodities with other inflation hedges like Treasury Inflation-Protected Securities (TIPS), commodities, real estate investment trusts (REITs) for balanced protection.

• Stay Disciplined: Use dollar-cost averaging to enter commodity ETFs over time, reducing the risk of buying at a peak.

• Monitor CPI and Fed Moves: The upcoming inflation data and FOMC meetings will provide clues on inflation and rates. Stay informed to adjust your strategy.

Take Disciplined Action

If you acted on our July advice to allocate to commodities, your portfolio is likely outperforming the S&P 500. If not, don’t chase gold and silver at these highs, wait for a pullback or use dollar-cost averaging to build exposure. Inflation isn’t going away, and with rate cuts and geopolitical risks on the horizon, commodities remain a critical hedge for retirement portfolios.