Gold steady ahead of Fed meeting results and press conference
Greenlight’s Einhorn sees gold gaining as Fed stays behind the inflation curve

(USAGOLD – 7/28/2021) – Gold is steady ahead of today’s Fed meeting results and Chairman Powell’s press conference. With both bond yields and the dollar gaining ground, Wall Street, it seems, anticipates a slightly hawkish result. The yellow metal is level at $1800. Silver is attempting to regain its footing after yesterday’s steep decline. It is up 7¢ at $24.82. Though most of Wall Street, as reflected in recent financial market pricing, buys into the Fed’s assessment that inflation is a temporary problem, Greenlight Capital’s David Einhorn sees things much differently.

Chairman Powell,” he says in his quarterly client letter released Monday, “is committed to remaining very accommodative for a long time and then only gradually tightening. We believe he will find whatever excuse he needs to do so, no matter what the data shows. The result, we believe, is that inflation won’t be aggressively addressed. So, the risk is to the upside. In our macro book, we hold inflation swaps and gold. The former will benefit from reported inflation being higher than the market expects. The latter should benefit as the market realizes the Fed is behind the curve and has no plans to catch up.”

Chart of the Day

overlay line chart showing the close relationship between growth in ETF gold stockpiles and the price of gold

Chart courtesy of • • • Click to enlarge

Chart note: Since the 2000s, there has been a strong relationship between growing gold ETF stockpiles and the price of gold.  The reduction in holdings over the past 18 months reflects declining interest on the part of institutional investors. Some analysts believe institutional and fund participation in the gold market could turn quickly should inflation prove to be persistent or id some other economic and/or financial market uncertainty surfaces.

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