Gold closes out a lackluster month for all investment markets except the US dollar
YTD: Stocks, bonds in dumpster, gold down moderately, commodities the star performer

(USAGOLD – 8/31/2022) – Gold trended to the downside in early trading, threatening to revisit chart lows below the $1700 level where it has found support in the past. It is down $9.50 at $1717. Silver is down 37¢ at $18.10. Though  August has been a lackluster month for gold (down 4.4%), it has had plenty of company on the downside. Stocks are down 3.8%; the bond market is down 5%, and commodities are off 3.2%. The US dollar index remains the outlier – up 2.9% on the month. Year-to-date performances offer a much different picture, with the dollar and commodities solidly on the upside (+13.3% and +17.7%, respectively); stocks (-16.9%) and bonds (-21.7%) in the dumpster, and gold – a ranking member of the commodities complex – down moderately by comparison (-4.8%). It has not been a good summer, and with a complete lack of clarity as to the net effect of Fed policy still hovering over markets, a wait-and-see attitude prevails.

Even with the correction that began in early summer, commodities have been the star performer thus far this year. Myrmikan Capital’s Dan Oliver offers some insight on what might be driving that performance. “Central banks,” he says in a lengthy analysis released yesterday, “have little ability to reduce commodity prices (and therefore the price level of goods) when they are driven higher because of bad regulation (as in the US), military destruction (as in the Ukraine), or political sanctions (as against Russia). Raising interest rates to inhibit demand to match lower supply makes financing commodity projects harder, reducing future supply, and, therefore, increases the costs of living still further. Only an act of desperation, such as throwing the economy into a depression to lower demand more than reduced supply can lower prices. But low prices also inhibit supply growth, meaning any recovery will send prices higher than before.”

(Editor’s note: In the September edition of News & Views, we address in some detail the controversial factors at work in the gold market with respect to Fed policy and inflation/stagflation. The lead article is titled  A market edict delivered from Mount Sinai, or a repeat of the 1970s? and posted in the clear at this link. We offer a sign-up at the bottom of the newsletter for those who would like to receive future editions.)

Gold, commodities, US dollar, stocks, and bonds performances year to date
overlya chart showing gold stocks commodities dollar and bonds year to date
Chart courtesy of TradingView.com

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