Gold advances as ground shifts on rates and a stronger payrolls number
Why have gold and silver been slow to catch the inflation bug?

(USAGOLD – 11/5/2021) – Gold advanced this morning as the ground shifted on future rate increases, and the non-farm payrolls number came in stronger than expected. It is up $4 at $1797. Silver is up 5¢ at $23.90. Both the Bank of England and Poland’s central bank surprised financial markets yesterday by retreating from promises to raise rates in 2022 to a more cautious approach. Their reluctance to raise rates falls in line with Fed Chairman Powell’s commitment on Wednesday to be “patient” on rate increases despite the rising inflation rate. In that context, the strong NFP number could be seen as symptomatic of a rising inflation rate that the Fed is willing to tolerate.

While commodity prices are in a steady uptrend  – the CRB Index is up almost 40% year to date – gold and silver have remained stubbornly in a range. In a recent interview posted at the ZeroHedge website, Equity Management Associates’ Lawrence Lepard was asked why precious metals seem to be the only commodities that haven’t caught the inflation bug as yet. “The metals were early to the party,” said the highly regarded fund manager, “and are now taking a breather while all the other commodities catch up. Gold was up over 50% in a two year window. It is down 15% in the past year. It is crazy and partly due to price suppression by the central banks, but they cannot hold it down forever and the next run will take it to new all time highs quickly in my opinion.”

Chart of the Day

Purchasing power of the US dollar
Line chart showing the purchasing power of the dollar 1913 present
Source: St. Louis Federal Reserve [FRED], US Bureau of Labor Statistics • • • Click to enlarge

Chart note: Since 1913, the US dollar has lost almost 96% of its purchasing power. Since 1971 and the introduction of the fiat money system, it has lost 85% of its purchasing power. Since 2008, during a period of relative price stability, it still lost over 22% of its purchasing power. 

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