Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
It is widely known that the value of gold seems to have an inverse relationship to the value of the U.S. dollar and a lot of experts recommend the metal as a hedge against inflation. Gold prices have remained low as the U.S. dollar has stayed strong despite the Federal Reserve continuing to pump money into circulation via their billion dollar bond-buying program. On Wednesday, a senior Fed official said that this trend may be in for a reversal.
“Inflation has been running very low. I have been concerned about low inflation,” James Bullard, president of the St. Louis Fed, said on Wednesday. He and other Fed officials want assurance that the low inflation is transitory, as Fed forecasts predict. If the forecasts are correct, then the transition from low inflation to high could be right around the corner.
The Fed has indicated that they would begin to taper their bond-buying program after its meeting next month. A change in policy could cause inflation to spike and could lead to a decline in the value of the dollar. Both are very good signs for the value of gold.
Investors remain cautious, however, because the Fed has not made their plans very clear. Bullard has been outspoken about this as well, saying that the Fed should have signaled more strongly its willingness to keep its stimulus in place out of concern inflation was not heading higher. The low inflation and the Fed’s lack of clarity are a couple of reasons U.S. gold buyers have been holding back. A clear signal by the Fed next month that the bond-buying program would be eased back could give investors the confidence they need to jump back in and start buying gold at its current low level.