Why Is Gold And Silver So Low?

Gold and silver are usually thought of as an inflation hedge, that is one of the reasons I stack it, but lately as inflation is climbing gold and silver are dropping? Why?

Inflation

I know that sounds counter to the prevailing wisdom but as the Fed raises interest rates to counter inflation the "value" of the USD, as expressed against a basket of world currencies, is rising. As gold is valued in USD, and the value of the USD is rising against the other world currencies, the price of gold is dropping.

"In economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of the government's tax revenue. The Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, and that there is a tax rate between 0% and 100% that maximizes government tax revenue."

In other words, cutting taxes increases revenue by spurring economic growth resulting in more activity to tax even at a lower rate, until the tax cut is so great that the economic growth isn't enough to offset the lower rate.

At some point I think we may see a similar effect with the USD. If the US inflation rate exceeds the worlds by a larger amount than the increased Fed interest rate than holding USD would be a losing proposition and the USD would drop in relationship to other currencies. Also if other countries raise their interest rate to counter the Fed

For example the US has a 8% inflation rate and the UK 7%. If the interest rate in the US exceeds the UK rate by 1% than holding USD versus Pounds Sterling makes sense and the USD would rise against the GBP. A year ago one GBP was worth $1.40, today closer to $1.20. That difference is reflected in the price of gold.

Yes there are many other factors that come into play in setting the relative value but I think gold and silver are being held down due to a strong dollar relative to other currencies and if that strength falters gold and silver will rise proportionally