DMR–Gold warms; its third day on the plus side

DAILY MARKET REPORT

Gold is warming a bit as we head into the second half of summer having spent the past three days in positive territory, though modestly so.  The yellow metal is trading in the $1216  range – up $2.50 on the day. Silver is up 7¢ at $15.49.  It is still too early to call the positive pricing in recent days a turnaround, but at least we can say the metals are steady at current prices, even if the support seems somewhat tenuous.  In a bit of a surprise given widespread anecdotal reports of price increases from various manufacturers and wholesalers over the past couple of weeks, producer prices came in unchanged this morning.  Some among the financial commentariat will see the timid showing as supporting the secular stagnation argument and cause for the Fed to go easy on its interest rate plans.  Others will see it simply as the lag between the reporting framework and reality.  That, in a small way, might be adding to gold’s performance thus far today.

Quote of the Day
“One thing that might even be most disturbing of all, is that no real crisis ever ultimately expresses itself, which actually, oddly enough, may be the worst outcome of all. That is to say, everything we see about our world today, the rich getting richer, the poor getting poorer, democracy sort of ebbing away, people feeling powerless over their political lives, people feeling less and less a sense of civic participation or belonging, and we have kind of turned that up. There is an interesting book by Tyler Cohen. He is a very popular writer now, he wrote Average is Over and The Great Stagnation. He wrote a recent book called The Complacent Class. If you want to read a book about America’s future in the absence of a fourth turning, read that book. The real rate of return gets lower and lower, we kind of approach the stationary state, productivity growth kind of ebbs to nothing, we become a kind of nominal market society, but one in which all the markets are dominated by a few very large companies with enormous market power and concentration. In that kind of society, highly stratified, not feeling at all like what we think of as being America, is, I think, the scariest one, one in which global problems, problems of global order are not rectified. And it is one that disturbs me the most.” – Neil Howe, McAlvany Weekly Commentary, 7/7/2017

Chart of the Day

Chart note: During that 18-year period from 2000 to present, the one-year Treasury provided a positive real rate of return in only six years.  The rest of the time, the real rate of return was negative.  The real rate of return is also important in the context of Federal Reserve interest rate policy in that it signals the performance of the dollar against other currencies and gold.  At the moment, the consensus opinion is that the Fed will keep interest rates below the inflation rate in order to keep the economy from swinging into a downturn, a situation causing some analysts to question the longer-term staying power of the recent rally in the dollar.

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