American consumers are feeling the sting of inflation today more than any time in the last 40 years. As of December 2022, inflation rose to 6.5% – the highest 12-month increase since 1981. From the gas pump to the grocery store, households are seeing their purchasing power rapidly erode. According to CNN, the average American household paid over $709 more per month in 2023 then in 2021 due to spiking costs for necessities.

Paul Stone, Chairman and CEO of precious metals dealer Colonial Metals Group, sees inflation as a destroyer of wealth. As he explains, “Inflation is a monetary disease with consequences as real as any plague or virus. Over time, it can devastate what you’ve worked so hard to save and erode the value of your dollars.” For investors looking to shelter their assets from inflation, Stone advocates allocating a portion of savings to gold and silver – assets which have an over 5000-year track record as stores of value.

The Inflation Threat Intensifies

While the latest Consumer Price Index report showed inflation cooling slightly to 6.5%, most economists don’t foresee substantial relief in 2023. They expect inflation to remain well above the Fed’s 2% target next year due to persistently high costs for food, rent, healthcare and fuel. A 2022 study by Harris Poll found that 75% of Americans believe inflation will continue rising. This expectation fuels further inflation, as people stock up on items expecting higher future prices.

Paul Stone sees today’s rising prices as part of larger global debt binge with inevitable consequences. As he analyzes, “When governments print money without restraint to cover uncontrolled spending, inflation invariably shoots up and currencies get debased just as they have done for centuries.” He adds, “Math doesn’t lie – the US dollar has lost over 97% of its purchasing power since the Federal Reserve was established in 1913.”

How Precious Metals Help Hedge Inflation

Investors have turned to gold and silver to preserve wealth through centuries of financial turmoil from the Roman empire to Weimar Germany. Unlike paper currencies, these precious metals cannot be debased by printing presses. Supply constraints also support their value. Today, over 60% of institutional investment managers use gold to hedge inflation risks.

Paul Stone views precious metals as necessary “inflation insurance” for portfolios today. As he advises investors, “While past performance doesn’t guarantee future results, if you look at the past 5000 years, an ounce of gold bought about the same amount of bread or milk throughout history. I don’t see any reason why that would change going forward.” With inflation now at multi-decade highs, history suggests precious metals will shine brighter.

While precious metals like gold and silver can provide an inflation hedge, not all precious metal products are created equal. Certain factors like purity, liquidity, divisibility and storage costs determine their effectiveness as an inflationary safe haven.

Paul Stone cautions clients to only acquire coins and bullion bars approved for IRAs from mints like the Royal Canadian Mint. As he explains, “We ensure our clients own investment-grade gold and silver bullion coins and bars to maintain maximum liquidity. You don’t want rare numismatic collectibles but rather legal tender products with reliable value.” Stone also advises holding metals personally or through segregated storage rather than pooled accounts.

Above all, the precious metal products must meet minimum fineness purity levels – 99.9% or higher for gold and silver. This guarantees the intrinsic melt value and liquidity necessary for an inflation hedge that investors can rely on in times of crisis.

With inflation expected to remain painfully high in 2023, investors need to safeguard their life savings from losing even more purchasing power. As Paul Stone warns, “Inflation is here and likely getting worse before it gets better. But precious metals have helped people preserve wealth for thousands of years through all types of economic chaos.” By allocating a portion of assets to physical gold and silver, particularly investment-grade coins, investors can mitigate inflation-driven erosion. While not immune from price volatility, precious metals have historically offered a reliable shelter from the inflation storm.