Again, inflation jumped from 2.7% in 1972 to 14.8% in 1980. That setup also kicked off gold’s 1,200% rally over the same period. It was a darn impressive run.
Now, I don’t expect to see the metal soar quadruple digits from here. And I don’t expect we’ll see double-digit inflation either. But we don’t need the extreme inflation of the late 1970s for gold to rocket higher.
We just need inflation to start rising by a modest amount. Let’s look at a few historical cases to see what I mean…
The U.S. went into a recession after the dot-com bust in 2000. The easy gains of the late 1990s were over for technology stocks.
Inflation dropped, hitting 1.1% in February 2002. Gold prices fell slightly from February 2000 over the next two years as well. Then the Federal Reserve stepped in…
To try and fire the economy back up, the central bank cut interest rates 11 times in 2001 alone.
Low interest rates make it cheaper for businesses to borrow money. This encourages folks to spend more and take out debt to buy houses, cars, and other goods. And in the long run, these low rates can send asset prices soaring, eventually causing inflation.
That’s exactly what happened. Inflation heated up, rising from 1.1% in 2002 to 5.6% by mid-2008. And gold prices took off…
Gold went from $282 an ounce on January 31, 2002 to $1,002 an ounce by mid-March 2008. That’s roughly a 250% gain in six years. Take a look…
As inflation moved higher from 2002 to 2008, so did gold. It was one of the largest gold bull markets since the 1970s. And that wasn’t the only time this happened.
Most folks wouldn’t have expected yet another great gold boom to be around the corner after 2008. But looking back, once again, the Fed’s actions were a dead giveaway…
The global financial crisis followed gold’s 2008 peak. And the Fed once again cut interest rates to near zero.
This time, inflation fell below zero in one of the worst recessions of our lifetimes. It hit -2.1% by July 31, 2009… And then it rebounded just as sharply as it fell.
By September 2011, inflation was back up to 3.9%. During that same period, gold spiked nearly 100% in two years. Check it out…
Gold even outperformed the S&P 500 Index over that period. Stocks were up just 24% in that two-year span.
Clearly, the 1970s are the banner example of rising inflation triggering a gold boom. But that’s far from the only time we’ve seen the trend play out.
Importantly, the same kinds of things that set off inflation in these past scenarios are happening today…
The Fed has once again lowered interest rates to zero in order to boost the economy. Even more, Fed Chairman Jerome Powell announced that he wants to keep interest rates low for at least three years.
The Fed’s goal is to send inflation above 2%. That 2% level is one that it hasn’t been able to achieve in recent years. But Powell is determined to make it happen now – and beyond.
Today, inflation is at 1.3%. And if the Fed has any say in it, we could see that number rise to 4% – or even 6% – in the coming years.
That will be enough to send gold on a multiyear bull run. And it means the metal could double – or more – from here.
That means $3,000 could be just the beginning for gold. It won’t happen overnight. But the setup is in place. And that means you need to own the metal now.
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