Gold marginally lower in quiet, pre-holiday trading
‘We have one of the most speculative zeitgeists on record’

(USAGOLD – 11/24/2021) – Gold is marginally lower in the follow-up to the stiff downtrend of the past two days. It is down $3 at $1787 in quiet, pre-holiday trading. Silver is down 16¢ at $23.55. Though the question of the Fed’s leadership is now behind us, the uncertainties surrounding future monetary policy remain. “Wall Street banks,” Reuters alerts us this morning, “are planning for a sustained period of higher inflation, running internal health checks, monitoring whether clients in exposed sectors could pay back loans, devising hedging strategies and counseling caution when it comes to deals.”

In a recent interview with themarketNZZ, Interest Rate Observer’s James Grant cites inflation as an emerging problem but also worries about where the current market mania might be leading us. “Things are very different, they are singular: We have the lowest interest rates in about 4000 years, or perhaps 3990 years because they have recently gone up a bit. But these are still some of the lowest interest rates on record. At the same time, we have some of the highest equity valuations with perhaps the exception of 1999 and 2000. And, we have one of the most speculative zeitgeists on record. It is a time of disinhibition, of rampant, riotous speculation and of all the accompanying thrills and chills.”

Chart of the Day

line chart showing the deteriorating real yield on the 10-year Treasury
Sources: St. Louis Federal Reserve [FRED], Board of Governors of the Federal Reserve System (US)

Chart note: The inflation-indexed real rate of return on the 10-Year TIPS is fluctuating around the minus 1% level. With inflation on the rise, the negative real rate of return will accelerate unless the Fed and/or bond market pricing push yields higher at an equivalent rate.

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