Gold drops sharply in thin pre-holiday trading, BEA reports 1.6% drop in real GDP
Like before the Great Depression, ‘the Fed did in fact raise rates into economic weakness.’

(USAGOLD – 7/1/2022) – Gold dropped sharply in thin pre-holiday trading driven by recession fears and the prospect of further central bank tightening. It is down $21 at $1788. Silver is down 62¢ at $19.75. We came across a brief synopsis at ZeroHedge that breaks down what’s behind collapsing financial markets as well as anything we have seen of late. Citing the recently released Bureau of Economic Analysis report on real GDP (which shows it dropping by 1.6% in the first quarter of 2022), the pseudonymous Tyler Durden writes:

“It’s important to keep in mind that this plunge in GDP occurred BEFORE the Federal Reserve started raising interest rates. Meaning, the Fed did in fact raise rates into economic weakness, much like they did during the onset of the Great Depression, causing even more damage to the economy in the process and prolonging the effects of the crisis. The difference this time is that we do not face a standard deflationary threat, but a stagflationary one. It’s a completely different ballgame.”

There have been rumblings of late that the Fed is compounding its bad inflation call with another miss on the rapidly developing slowdown. For the record, we include a chart this morning showing the first half performances for gold, silver, stocks, and bonds. Gold held its own through the first half, but the recessionary effect on the silver price is plainly evident. Stocks suffered their worst first-half decline since the 1960s, and bonds posted their worst first half since the early 1970s.

All in all, it has not been a very good year for investment markets, although we are grateful for gold’s stubbornness. If stagflation is where we are headed, it might be helpful to recall how gold and silver performed the last time it came calling in the 1970s. All said, the July 4th break is well-timed.

Gold, silver, Dow Jones Industrial Average, and Bonds (TLT)
(% gain or loss, year to date (6-30-2022)

overlay line chart showing gold silver stocks bonds performances first half 2022
Chart courtesy of • • • Click to enlarge

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