American companies have spent decades widening the gap between what it costs them to produce goods and what they charge at the register. A recent Goldman Sachs research note, highlighted by Yahoo Finance, puts numbers on the trend and offers an explanation that should matter to anyone holding gold, silver, or any other store of value: consumers have grown less sensitive to price, and firms are capitalizing on it.

When consumers stop bargain-hunting, companies widen markups, profit margins expand, and the inflationary impulse becomes structural rather than cyclical. For metals investors, this is a signal that the price level is unlikely to retreat to pre-pandemic norms, reinforcing the case for hard-asset exposure.

The Goldman economists wrote that after-tax corporate profits as a share of value added have roughly doubled from about 5% in the late 1980s to over 10% recently. Over the same span, U.S. firms “substantially raised markups,” which they define as the amount by which prices exceed the marginal cost of producing goods and services. That is not a temporary post-pandemic spike. It is a four-decade structural shift.

The Mechanism: Income, Inequality, and the Cost of Shopping Around

Why would consumers tolerate paying more? The Goldman note points to a straightforward mechanism rooted in opportunity cost. As the economists put it:

“Higher income raises the opportunity cost of time, leading consumers to search less for lower prices.”

In plain terms, wealthier households value their time more than the savings they might capture by comparison shopping. And because income inequality has widened over the same period, the share of total consumption driven by less price-sensitive households has grown. The people doing most of the spending are the people least inclined to hunt for a deal.

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Goldman cited work by economist Kunal Sangani, who estimates that increases in average income and in income inequality can account for a roughly 8 percentage-point rise in the aggregate retail markup from 1980 to 2018. Eight points is enormous. It means a meaningful slice of what consumers pay above cost is explained not by supply shocks, tariffs, or energy disruptions, but by a slow demographic and behavioral shift in who spends and how they spend.

Consumers Complain, Then Keep Spending

The article notes a paradox familiar to anyone tracking sentiment data. Surveys confirm that consumers are well aware of rising prices and are vocal about their frustration. Yet the economic data tell a different story: inflation has not really stopped people from spending. The economy continues to grow, profit margins continue to expand, and corporate earnings continue to rise.

That disconnect between sentiment and behavior is critical. It suggests that the inflationary regime is more durable than headline consumer-confidence numbers imply. People may tell pollsters they are unhappy about prices, but their wallets keep opening. As we explored in our coverage of consumer sentiment reaching record lows while inflation anxiety spreads, the gap between how Americans feel and how they act has become one of the defining puzzles of this cycle.

For companies, the math is simple. If customers keep paying, there is no incentive to cut prices. Markups widen. Margins hold. Earnings grow. The feedback loop sustains itself as long as employment and income remain strong enough to fund the spending.

What This Means for Inflation and the Price Level

The standard story about inflation focuses on supply shocks, energy costs, and central-bank policy. Those inputs matter. But the markup story adds a layer that is harder to reverse with rate hikes alone. If firms have structural pricing power because their customer base has become less price-sensitive over decades, then even a period of tighter monetary policy may not compress margins back to historical norms.

This has direct implications for the purchasing power of the dollar. A price level that ratchets higher and stays there, supported by corporate pricing power rather than just monetary expansion, is a different animal than a temporary supply-driven spike. It is stickier. It is less responsive to Fed jawboning. And it erodes the real value of cash and fixed-income holdings in a way that accumulates quietly over time.

Survey data reinforce the point. As we noted in our report on 87% of consumers expecting higher prices ahead, the public has largely internalized the idea that costs are not coming back down. When expectations become anchored at a higher level, firms face even less pushback on pricing.

The Grocery Aisle as Ground Zero

Nowhere is the markup dynamic more visible than in food. Grocery costs have been a persistent source of household frustration, and the forces pushing them higher extend well beyond corporate pricing decisions. Supply-chain disruptions, weather events, and trade policy all play a role, as we examined in our look at grocery prices set to surge under pressure from weather, war, and tariffs. But when consumers absorb those higher costs without meaningfully cutting back, producers and retailers learn that they can hold the new price points even after the original supply pressure fades.

That ratchet effect is what makes the markup story so relevant to metals investors. It is not about one bad quarter of CPI data. It is about a structural floor under the price level that keeps moving higher.

The Gold and Silver Case in a Markup Economy

Gold functions as a long-duration claim on purchasing power. When the price level rises and stays elevated, the real return on cash and short-duration bonds deteriorates. Investors who hold bullion are not betting on a single inflation print. They are positioning against the cumulative erosion of currency value over years and decades.

The Goldman data on markups strengthens that positioning logic. If corporate pricing power is structural, driven by income dynamics and behavioral shifts rather than temporary bottlenecks, then the inflationary impulse is harder to kill. The Fed can raise rates to cool demand at the margin, but it cannot force consumers to start comparison shopping again. It cannot reverse decades of income concentration. And it cannot compress markups that are sustained by the spending patterns of households with the highest propensity to consume without regard to price.

Silver, which carries both monetary and industrial characteristics, faces a somewhat different calculus. Industrial demand ties silver to the broader economy, meaning a genuine recession could weigh on it even as inflation persists. But in a scenario where the economy keeps growing and margins keep expanding, silver benefits from the same purchasing-power argument that supports gold, with the added tailwind of industrial consumption.

Broader inflation context matters here, too. Ahead of key data releases, consumer anxiety and energy-price volatility continue to shape the backdrop, as we discussed in our analysis of U.S. inflation data and the market anxiety surrounding it.

What the Markup Story Does Not Tell You

There are limits to this framework. The Goldman note and the studies it cites cover a period ending in 2018 for the Sangani estimate. Whether the same dynamics have accelerated, plateaued, or shifted since then is not fully addressed. The article also does not specify which sectors or companies are driving the markup expansion, leaving open the question of whether this is broad-based or concentrated in particular industries.

There is also the question of durability. A recession severe enough to push unemployment sharply higher could force consumers to become price-sensitive again, compressing markups. The mechanism runs on income and employment. Remove those supports, and the pricing power could erode quickly.

For now, though, the data point in one direction:

  • After-tax corporate profits as a share of value added have roughly doubled since the late 1980s
  • U.S. firms have substantially raised markups over the same period
  • Rising income and income inequality account for an estimated 8 percentage-point increase in aggregate retail markups from 1980 to 2018
  • Consumer spending has continued to grow despite vocal complaints about prices
  • Profit margins and corporate earnings continue to expand

Portfolio Relevance

For readers focused on capital preservation, the markup story is a reminder that inflation is not just a monetary phenomenon. It has a corporate-behavior component that monetary policy alone may not reach. When firms can charge more and consumers keep paying, the price level becomes a one-way ratchet. Cash loses value. Bonds with fixed coupons lose purchasing power. And the case for holding assets that cannot be diluted by policy or eroded by pricing power grows stronger.

Gold and silver do not generate earnings. They do not benefit from markup expansion the way equities do. But they also do not depend on the continued willingness of consumers to absorb higher prices. They sit outside the corporate pricing chain entirely, which is precisely their value in a world where that chain keeps tightening against the buyer.

Meanwhile, energy costs continue to feed into the broader price structure. Oil-price volatility, as we covered in our analysis of supply damage already baked into oil markets, adds another layer of input-cost pressure that firms pass through to consumers, further supporting the markup dynamic.

The distinction between miners and bullion matters here as well. Mining equities benefit from rising gold prices but carry operational costs that are themselves subject to markup inflation. Higher energy, labor, and materials costs compress miner margins even as the gold price rises. Bullion holders avoid that exposure entirely.

The Quiet Ratchet

The Goldman research note describes a world where the price level does not need a crisis to keep climbing. It just needs consumers who can afford to stop shopping around. That is a quieter, less dramatic form of inflation than the supply-shock variety, but over time it may be more corrosive to purchasing power precisely because it does not trigger the kind of alarm that forces a policy response.

When the system’s inflation is structural and behavioral rather than cyclical and monetary, the traditional playbook of waiting for the Fed to fix it becomes less reliable. The markups do not compress because the Fed raises rates by another quarter point. They compress when consumers can no longer pay, and that threshold keeps moving higher as incomes grow.

For metals holders, the message is straightforward. The forces supporting a higher price level are not temporary. They are woven into the income distribution, the spending patterns, and the corporate incentive structure of the modern economy. Gold does not need a crisis to justify its place in a portfolio. Sometimes the slow, quiet erosion of purchasing power is reason enough.