After a few months in which inflation seemed to be starting to stabilise, prices have accelerated again in Europe in 2026. This time, the main trigger is not excessive consumption, but the rising cost of energy as a result of tensions in the Middle East.

When oil prices rise, it does not only become more expensive to fill up the tank: transport, industrial production and, in general, a large part of economic activity also become more costly. Sooner or later, part of these costs ends up reaching consumers.

Against this backdrop, the European Central Bank has once again turned to one of its main tools: interest rates. But to understand why it does this, we need to start at the beginning. What exactly is inflation? Why can raising rates help control it? And why, when money loses purchasing power, does gold regain prominence?

When money buys less

Inflation is the general increase in prices over a period of time. Put much more simply, it means that the same amount of money buys fewer things.

If today we have €100 and can buy ten products costing €10 each, but a year later those same products cost €11, our €100 is still the same amount. The problem is that it no longer has the same real value.

In August 2026, annual inflation in the euro area reached 3.3%, after 2.9% in July, and energy was the component that rose the most, with a year-on-year increase of 14.3%. By contrast, if energy is excluded, inflation remained much more contained, which clearly shows where much of the current pressure on prices is coming from.

This difference is important because the European Central Bank aims to keep inflation at around 2% over the medium term, a level it considers compatible with price stability. When inflation moves too far away from this objective, the ECB intervenes to prevent the increase from becoming a persistent problem.

The problem starts with energy

Not all inflationary crises have the same origin. The one we experienced in 2021 and 2022 combined supply chain problems after the pandemic, a very rapid recovery in consumption, expansionary monetary and fiscal policies and, finally, the energy impact of Russia’s invasion of Ukraine.

The current rebound has a different composition. This time, the main factor is an energy supply shock related to the conflict in the Middle East, which has pushed up the price of oil and other energy sources.

The effect spreads quickly. If fuel becomes more expensive, transporting food and goods costs more. The costs of many factories and services that depend on energy also increase. Companies may absorb part of this extra cost for a while, but when the situation lasts, they usually pass part of it on to consumers.

This is how an energy crisis turns into inflation. A problem that initially affects oil ends up influencing the price of food, clothing, services or practically any product that needs energy or transport to reach us.

The united kingdom shows the domino effect

The United Kingdom provides a good example of this transmission. Annual inflation rose from 2.9% in July to 3.1% in August 2026, with transport being one of the main drivers of the increase. Vehicle fuels became 23% more expensive in one year.

But the effect could already be seen before products reached consumers. The cost of materials and fuels used by British manufacturers was rising by 6.1% year on year, while factory gate prices were increasing by 3.7%.

This process sums up the current inflationary mechanism well: first, raw materials become more expensive, then business costs rise and, finally, part of that increase is incorporated into selling prices.

What can the ECB do?

This is where interest rates come into play, which are simply the price of borrowing money. When a family takes out a mortgage or a company seeks financing, it does not only repay the money it has received, but also pays interest. The higher the rate, the more expensive it becomes to borrow.

The European Central Bank does not directly set the rate on each mortgage, but it does establish the official rates that influence the cost of money within the banking system. When it raises them, credit tends to become more expensive and this reduces consumption and investment.

A family may postpone buying a car or a home, while a company may decide that a new investment is no longer profitable enough. If the economy spends less, pressure on prices decreases and inflation tends to moderate.

But this tool has an obvious limitation: higher interest rates cannot produce more oil or resolve a geopolitical conflict.

When inflation originates from an energy supply problem, the ECB cannot act directly on the cause. What it tries to do is prevent the initial rise in energy prices from spreading throughout the economy and ending up generating a permanent cycle of price and wage increases.

This forces the central bank to seek a difficult balance. If it does too little, inflation may become entrenched; if it raises rates too much, it may cool the economy excessively.

The cost of slowing prices

For households, this situation creates pressure from two sides. Inflation reduces the purchasing power of income and savings, while higher interest rates make loans, mortgages and business financing more expensive.

This is one of the reasons why central banks try to act gradually. ECB projections suggest that inflation will continue to moderate over the coming years, but they also show that returning sustainably to 2% is not necessarily an immediate process.

And it is precisely when this combination of inflation, high interest rates and geopolitical uncertainty appears that many savers begin to wonder whether keeping all their wealth in cash is enough.

Why is gold gaining prominence again?

When inflation, high interest rates and geopolitical uncertainty coincide, many savers begin to wonder whether keeping all their money in cash is enough. The problem is simple: the euros we have in our account do not disappear, but if prices continue to rise, they buy less and less.

It is in this context that gold regains prominence. Unlike the euro, the dollar or the pound, it cannot be created by decision of a central bank. It is a physical, scarce asset that is costly to extract, and this gives it characteristics that differ from those of traditional financial assets. This does not mean that its price always rises or that it automatically protects against every inflationary episode, but it can help diversify wealth and reduce dependence on a single currency or a single type of asset.

This role helps explain why central banks themselves continue to accumulate it. During the second quarter of 2026, they bought 289 net tonnes of gold, and a large majority of reserve managers surveyed by the World Gold Council expect global gold reserves to continue increasing. Among the main reasons are diversification, long-term value preservation and the need to reduce exposure to monetary and geopolitical risks.

For savers, the key idea is that keeping money and preserving its purchasing power are not exactly the same thing. If all wealth is concentrated in cash, any loss in the value of the currency affects all savings. Including assets that behave differently can help spread that risk.

Gold does not eliminate inflation or guarantee returns, but its scarcity, its physical nature and its independence from any issuer explain why it continues to form part of central bank reserves and many wealth management strategies.

Protecting savings with physical gold has been one of 11Onze’s greatest contributions to its community, and its range of products continues to expand. In today’s environment of market volatility, persistently high inflation and growing distrust in the banking system, gold is once again strengthening its role as a safe-haven asset. Discover Or Llavor at Preciosos 11Onze.