Homepage / Bullion Market Basics: Inflation...explained
Last Updated on 01/26/2025
Inflation is the devaluation of a currency through the increase in the amount of money circulating in society, resulting in the eventual rise in the price of services and goods.
How does the government calculated the rate of inflation? By comparing the price of a good or service in the past with its current price.
If the inflation rate is 4% a quarter, then a $100.00 item bought at the beginning of the quarter will cost $104.00 by the end of the quarter, and by the end of the year, that item will cost $116.99.
The results of inflation are always the same: the value of goods and services increases as the value of money decreases.
How do these Market Factors interact together in a Low Inflationary market compared to a High Inflationary Market?
Stable Currency, Lower Commodity Prices, Normal Interest Rates
When a government's inflation rate is low, its currency's value is stable, interest rates on this government's bonds are low, and its bond prices are high. Also, government debt may or may not be high; how its debt affects inflation is determined by how well it is managed.
When a government's bonds sell at a higher price, it indicates market confidence, and it suggests that investors believe the government will repay the bond upon its expiration. Bonds issued by a government like this would be in high demand and considered a safe-haven investment.
A stable currency, or one that holds its value, keeps commodity prices low because it takes less money to buy the commodity.
Lower commodity prices help to make the services and manufactured goods less expensive, giving the citizens of the government in this scenario a low inflationary environment.
Falling Currency Value, Higher Commodity Prices, Higher Interest Rates
When a government prints, spends, and hands out excessive amounts of
money, the value of its currency falls due to the increase in the money
supply and debt. (Example: Covid-19 Stimulus of 2021)
When you have inflated dollars in circulation, the cost of goods increases because commodities can't just be printed out of thin air, like dollars. Instead, commodities must be mined, grown, and drilled in one way or another, which requires time and money causing their raw value to increase.
Meanwhile, the government continues to print and spend more money, continually reducing the value of the currency. When the higher-priced commodities are manufactured and come to the marketplace, more dollars are chasing them, and prices rise as the product sells, causing supply shortages.
This is how the stock market begins to rise in an inflationary environment: prices in stores are higher, so when a company sells these inflated goods, it earns more money, increasing its earnings.
However, when the constant higher prices finally start to creep into consumer savings, it causes the consumer to retract and stop buying some goods to pay for others.
This is how high inflation hurts the stock market. When the product is a consumer staple (toilet paper, electricity, food), the consumer will buy it as they need resupply, but if the item isn't a consumer staple, in a high inflation economy, it will get overlooked, and the company that supplies that item will lose revenue.
This is why economists recommend investors who are in the stock market buy consumer staples when a market is in trouble because these companies do the best in inflationary environments and in hard times.
Furthermore, interest rates on bonds rise in this scenario; a government that is selling these bonds to fund its spending activities will be unable to sell its bonds at face value because nobody wants to buy them.
Higher interest rates on government bonds indicate to potential investors that this is a high-risk bond, commonly known as a "Junk Bond," and that they would be taking on significant risk by purchasing it.
In this scenario, the bonds will not sell without a high reward, namely through higher interest rates, and unless the government pays off its debts, it will not be able to pay the interest, its currency will lose value, and inflation will increase.
(Ex: Venezuela)
Governments should strive to keep their debt low because they must repay both the debt and the interest.
For Bullion Market News...
Notice:
The charts, commentary, and information on the Free-Bullion-Investment-Guide.com are not meant to encourage you to invest or divest in any particular way.
Support this Guide & Paypal Thank You for Your Support |
|
|
![]() |
Search the Guide
search engine by freefind | advanced |
Daily
Newsletter
Newsletter
Gold Libertads |
Chinese Gold Coin Group Co.
& Chinese Bullion
Help Us Expand our Audience by forwarding our link
www.free-bullion-investment-guide.com.
Thank You!
In No Particular Order
August 2025
Shaping the Story: How Shape and Size Enrich a Coin’s Narrative - Royal Canadian Mint Gold Investors Go It Alone for Advice - Bullion Vault Graphic: Charted: The History of U.S. Recessions - Visual Capitalist Silver on USGS critical mineral list: stockpiling by US Government in the works? - Yesterday, August 25, 2025, the US Department of the Interior (DOI), through the US Geological Survey or USGS, listed Silver as a critical mineral.- Silver Bullion (Malaysia) Fidelity: Why the gold bull run is far from over - Asset class is not losing its shine and is already up 28% year-to-date- PA advisor Video: Further Upside in Gold Driven by Falling USD: Morgan Stanley - Bloomberg Gold is more like Manhattan real estate than oil, according to Goldman Sachs - Gold may be a commodity, but its price moves more like prime Manhattan real estate than barrels of oil, Goldman Sachs analysts wrote- Forbes (msn) (.pdf) Report: Market Trend Report for Key Physical Silver Investment Markets August 2025 - The Silver Institute Engelhard Bullion is Revitalized: MKS PAMP GROUP and BASF ECMS Proudly Revive Iconic Engelhard Classics at ANA 2025 - MKS PAMP Tariff Rebate Checks Are a Bad, Inflationary Idea - reason Decoding US gold bar tariff twist: how customs ruling jolted global bullion markets - invezz Report: Gold Demand Trends: Q2 2025 - World Gold Council Bullion Holding Firm - Precious metals remain steady, but collector demand for gold and silver coins surges at home and abroad, with dealers reporting strong turnover and buyers eyeing coins as inflation hedges.- Numismatic News Redollarization and Digital Statecraft: How Stablecoins Are Rewiring Global Power - Stablecoins, Statecraft, and the New Dollar Megastructure through the Genius Act - Financial Sense (.pdf) Report: Monthly Gold Compass - August 2025, Analysis includes: Gold, Silver, Mining Stocks Review, and more... - incrementum The Price of Gold Over the Decades - 24/7 WallSt. Antiques: Not all silver dollars are alike. What are yours worth? - The Desert Sun Palm Springs (msn) Mysterious coin linked to Jesus' biblical prophecy discovered - Daily Mail (.pdf) Report: Global Silver Investment Heightens in 2025 - Inflows into Silver-Backed Exchange-Traded Products Already Surpass 2024 Totals - The Silver Institute Graphic: Silver Mine Production Meets Surging Industrial Demand (2016-2025) - Mining Visuals The return of the gold bugs - Rothschild & Co. Podcast: Leigh Goehring On The Coming Revolution In Asset Markets - The Felder Report America Shocked After Learning Debt Must Be Paid Back - Stop the presses: Americans have just learned that borrowing money means eventually paying it back. Who could have guessed?- Quoth the Raven Margin of Safety - Bullion Vault Gold Nanoparticle Cancer ResearchSona NanoTech Provides Update on First-In-Human Clinical Trial on Treating a Variety of Melanoma Tumors - Sona NanoTech Light-and-sound-based thermometer helps gold nanoparticles destroy cancer - Biomedical engineers at Duke University have developed a method to more precisely heat up gold nanoparticles to target and destroy cancerous tumors. - PHYS.org $2 One-Drop Blood Test Detects Hidden Diseases in 15 Minutes - A new $2 gold nanoparticle test can detect deadly diseases in minutes, without a lab, offering life-saving speed and accuracy anywhere in the world. - SciTechDaily |
All Articles were Originally Posted on the Homepage