Gold stabilizes in a range below $1800 to start a busy week for financial markets
Incrementum’s Stoferle puts gold’s 2021 rangebound pricing into perspective

(USAGOLD – 11/26/2021) – Gold looks to be stabilizing in a range below the $1800 mark this morning as news filters through financial markets to start the week that the latest variant might not be as problematic as first thought. It is level at $1793. Silver is up 3¢ at $23.23. With several Fed luminaries delivering speeches, Chairman Powell testifying before Congress, Treasury Secretary Yellen weighing in with a speech tomorrow, and a steady stream of data releases culminating with Friday’s payroll report, Wall Street may get more than its fair share of stimulation this week. Incrementum’s Ronald Stoferle added some much-needed perspective over the weekend on gold’s stubborn, rangebound behavior thus far in 2021.

“Confidence comes from repeatedly fulfilled expectations,” he says in a speech titled The Tipping Point and the New Normality, “That’s why gold is many things, but certainly not dead. A 25% price rise in 2020 and its role as a hedge in the Covid Crash speaks for itself. And now gold is down 3.5%. But what is this 3.5% against the 25%, is this really so bad? No, and many other events speak in favour of gold. One of these is the gold purchases by central banks around the world. As Palantir’s interest shows, this is not limited to central banks. Comex gold delivery is also higher than it has been for a long time. And what do we see in technical analysis? The mother of all ‘cup and handle’ formations. A breakout from this formation could mean a price of $2800.”

Chart of the Day

Personal Consumption Expenditure Index
(% change year over year, 2016 to present)
line chart showing the personal consumption expenditure index less food and energy October 2021
Sources: St. Louis Federal Reserve [FRED], U.S. Bureau of Economic Analysis

USAGOLD note: The PCE price index posted its largest gain since 1990 last week at 4.4%, excluding food and energy. With food and energy, the index posted a 5% gain – another solid indication that inflation is anything but transitory.

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Posted in Daily Market Report, dailyquotes, Today's top gold news and opinion |

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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Gold continues lower after yesterday’s sharp sell-off
‘Never observed as many historical indications of a market peak occurring simultaneously’

(USAGOLD – 11/23/2021) – Gold pushed lower this morning in a continuation of yesterday’s sharp $40 sell-off. It is down another $13 at $1791. Silver is down 46¢ at $23.75. Yesterday’s downturn began with the Biden administration’s announcement that it would reappoint Jerome Powell as Fed chairman – the less dovish choice between him and Lael Brainard. Also, options expire today on the high-volume December gold futures contract, and it is not unusual to encounter increased volatility on and around options expiration dates. Gold was not the only investment market to encounter headwinds yesterday. Stocks unexpectedly lost momentum and bond yields firmed on the news of Powell’s reappointment as it began to settle in that the uncertainty in financial markets was likely to continue.

“Across four decades of work in the financial markets,” writes analyst John Hussman in the latest issue of his newsletter, “and over a century of historical data, I’ve never observed as many historical indications of a market peak occurring simultaneously. … Emphatically – and this is important – my intent here is not to ‘call the top’ of this bubble. Yes, this is a bubble in my view. Yes, I believe it will end in tears. Yes, the price investors pay for a given stream of future cash flows is inseparable from the long-term returns they can expect. Yes, if this bubble is ever to actually have a top, this would be a perfectly reasonable moment to expect one. Still, my present intent is simply to share what we’re observing.”

Chart of the Day

bar chart showing the average annual price of gold from 1971 to present
Sources: St. Louis Federal Reserve [FRED], ICE Benchmark Administration

USAGOLD note: It is interesting to note that even though gold is down thus far in 2021, if the year were to conclude today, it would post its highest average annual price ever at just below $1800 per ounce. The trend revealed in the chart will not be lost on the investor interested in long-term asset preservation despite intermittent price volatility.

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Gold lower in quiet pre-holiday trading
McClellan says safe haven currencies buying sends ‘bullish message’ for gold

(USAGOLD – 11/22/2021) – Gold is lower in quiet pre-holiday trading as it takes a breather after the gains since early November. It is down $5 at $1842.50. Silver is up 19¢ at $24.86. Market analyst Tom McClellan reminds us that gold, the Japanese yen, and the Swiss franc are all “fellow travelers correlating very strongly most of the time.” He goes on to say that peculative positioning in those currencies now underway in the futures markets might be pointing to a bullish scenario for gold.

“A sentiment indication that is useful for the yen can also be useful for gold prices,” he says in a report posted at the 321Gold website, “Right now, [commercial traders, i.e., smart money] are net long the yen in a big huge way, meaning that they are betting on the yen going up in value versus the dollar. We can also see that when these commercial traders are net long the yen futures in a big way like this, that tends to be a bullish condition for gold prices in the weeks that follow. … The Swiss franc also shows a very strong correlation to the dollar price of gold, and so its COT Report data can be used in the same way as the yen’s, as a sentiment proxy for gold prices. Here too, the commercial traders are net long the Swiss franc in a big way, and that tends to be a bullish message for gold prices.”

Chart of the Day

overlay line chart showing gold and world money supply 2000 to present
Chart courtesy of Merk Investments • • • Click to enlarge

Chart note: Though gold does not necessarily rise with price inflation, it is heavily influenced by growth in the money supply no matter where that stimulus ends up. Charts showing growth of the U.S. money supply and gold are fairly common. This chart is the first we have seen combining the price of gold with growth in the global money supply.

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Gold inches cautiously higher to close sideways week
Noland says central banks ‘coddle speculative markets at the system’s peril’

(USAGOLD – 11/19/2021) – Gold inched cautiously higher in early trading as it looks to close out the week about where it started. It is up $5 at $1865 after starting the week at $1867. Silver is down 3¢ at $24.84 after starting the week at $25.15. With inflation concerns now dominating market psychology, systemic credit issues have made their way to the backburner. However, long-time credit market analyst Doug Noland warns that instability in the highly leveraged global credit market could be the catalyst for the next monetary crisis.

“I believe it matters that China’s Bubble is faltering in a backdrop of powerful global inflationary dynamics,” he explains in his most recent Credit Bubble Bulletin newsletter. “At least in the near-term, the likelihood of the bond-pleasing deflationary scenario appears much reduced compared to a year or even six months ago. Perhaps that’s part of what has lately lit a fire under the ‘breakeven rates.’ Up another $46 dollars this week gold prices have also heated up.”

“It appears global central bankers have begun to lose control of bond yields,” he continues. “And if yields begin reflecting inflation realities, bond markets have an arduous adjustment period ahead. Returning to the Fed’s worst inflation call in decades. The developing global financial crisis has been decades in the making. Contemporary central bank doctrine is fundamentally flawed. Using the securities markets as the primary mechanism for system stimulus – for Credit growth and financial conditions more generally – ensures speculative excess, over-leveraging and Bubbles. Coddle speculative markets at the system’s peril.”

Chart of the Day

Gold and the national debt
(1970-2021Q2)
overlay line chart showing the correlation between gold and rising national debt
Chart courtesy of the St. Louis Federal Reserve [FRED], U.S. Treasury Department, ICE Benchmark Administration

Chart note: As the national debt has increased, so has the well-documented damage associated with it – to the dollar, financial markets, and the economy in general. Simultaneously, gold’s role as an inversely correlated portfolio hedge grew, as you can see from the chart above. Few correlations in the financial markets ring truer and more consistently than the one between the federal debt, now nearlng $29 trillion, and the price of gold. As for the future, we should keep in mind that the very same conditions that created the long-term secular trend for both the national debt and gold are still in place today.

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Gold off marginally in early trading
Analyst Grummes sees silver accumulation as ‘prudent measure to protect your wealth’

(USAGOLD – 11/18/2021) – Gold is off marginally in early trading as it continues to bounce in a range between $1850 and $1870. It is down $2 at $1867. Silver is down 6¢ at $25.08. Investors remain worried about inflation while uncertainty prevails over what the Fed intends to do about it – if anything. Though the price of silver is down year-to-date, investment demand, according to a report released by the Silver Institute yesterday, is up a strong 32% as investors pour capital into what they perceive to be one of the few remaining underpriced assets.

“In market movement, we see expansion and compression, much like an oscillator,” writes EU-based analyst Florian Grummes at the Seeking Alpha website. “At certain times though, may it be a natural or man-made disaster, we can find ourselves in a stretched or amplified move. These times of abnormality from a time perspective require being well-prepared. Swift, disciplined actions following a clear planned roadmap are advised. An anticipated roadmap is strictly followed. It is first a waiting game followed by quick action, both psychologically challenging environments. With physical acquisitions of metals, perfectionism in timing is paralysis. Not necessary to come out ahead. We find silver accumulation at this time to be a prudent measure to protect your wealth. Like buying insurance against an anticipated market turn.”

Chart of the Day

Silver and the CRB Index
(As a %, year to date, year over year)
Overlay line chart showing silver and the CRB
Chart courtesy of TradingView.com • • • Click to enlarge

Chart note: As you can see in the chart, silver has lagged the CRB Index year to date. Some analysts believe that it might rally at some point to close the gap.

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Gold pushes sharply higher in overnight trading
Japanese yen drops to five-year low against dollar

(USAGOLD – 11/17/2021) – Gold again pushed sharply higher in overnight trading as rising stagflation concerns continued to dominate investor thinking, and the Japanese yen dropped to its lowest level against the dollar in five years. Gold is up $14 in today’s early going at $1866. Silver is up 30¢ at $25.19. Rising inflation rates in most Asian economies – most notably in China and Japan (where disinflation has reigned for decades) – have provided the impetus for rising precious metals’ demand in the region. (Please see our Charts of the Day.)

“Gold continues to improve steadily,” says Credit Suisse in an analysis posted yesterday at FXStreet, “and has now cleared key price resistance from the July and September highs and downtrend from August 2020 at $1,834 to establish a five-month base. With the market also above rising short, medium and long-term averages evidence looks to be building we may be at the beginning of a more sustained move higher. We look for a test of the June high at $1,917, a break above which should add further weight to our view with resistance then seen next at $1,959/77 and eventually back to the $2,075 record high.”

Charts of the Day

United States producer price change
(%, 2016-October 2021)
bar chart showing escalating producer prices in the United States

China producer price change
(%, 2016-October 2021)
bar chart showing escalating producer prices in China

Japan producer price change
(%, 2016-October 2021)
Bar chart highlighting recent wholesale price increases in Japan

European Union producer price change
(%, 2016-October 2021)
bar chart showing escalating producer prices in the European Union

India producer price change
(%, 2016-October 2021)
bar chart showing escalating producer prices in India

Chart note: Perhaps we should be talking about the inflation contagion ……

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Gold pushes doggedly higher on stagflation concerns, central banks’ caution
Technical and fundamental factors now lining up in gold’s favor, says Lundin

(USAGOLD – 11/16/2021) – Gold pushed doggedly higher during Asian trading hours on rising stagflation concerns and a growing sense that central banks are inclined for now to take a cautious approach on tightening measures. The overnight rally carried over to early U.S. trading, where the yellow metal is up $11 at $1874.50. Silver is up 26¢ at $25.37. Gold Newsletter’s Brien Lundin believes we have reached a turning point in the gold market wherein both technicals and fundamentals are lining up favorably. The key reason? Economic data is showing “transitory inflation as the farce it always was.” (Please see our Charts of the Day.)

“Before the October CPI numbers were released,” he says in the November edition of his newsletter, “gold had rallied into the low $1,830s. This was smack-dab within the range of resistance that had turned it back in every previous rally since mid-summer. Of course, those inflation numbers catapulted gold right through those resistance levels, dramatically changing the outlook for the metals. This obviously makes it more likely that this rally is for real, and will keep on going. But beyond those basic, and admittedly powerful, technical factors, there are important fundamental differences this time around that add to gold’s rosier outlook. For one thing, there’s the crucial fact that the Fed has, finally, begun tapering. If our predicted scenario is valid, then gold is behaving exactly as we would expect. The shorts are closing out their bearish gold trade, and getting ready for the next big event.”

Chart[s] of the Day

Consumer inflation rate
(%, 2016 to October 2021)
bar chart showing consumer price inflation 2016 to present
Wholesale inflation rate
(%, 2016 to October 2021)
bar chart showing the change in producer prices United States year over year

Inflation expectations
(%, 2016 to October 2021)
bar chart showing inflation expectations 2016 to present

Charts courtesy of TradingEconomics.com • • • Click to enlarge

Chart note: In October, U.S. consumer prices registered a 21-year high at 6.2%. Producer prices set a record for the seventh straight month jumping 8.6% year on year. We should keep in mind that wholesale price inflation is not just an American problem. China, for example, reported producer prices rising 13.5% year on year last week, and Japan last week reported an 8% increase in wholesale inflation. Inflation expectations are an important data set because it, not the CPI inflation rate, is what is formally used to calculate the real rate of return.

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Gold looks tempted to go positive for eighth straight trading session
Silver setting up for ‘massive move higher’ says M&T Research

(USAGOLD – 11/15/2021) – Gold looks tempted to go positive in today’s early going after a run of seven straight winning sessions that took it deep into the $1800s. It is down $2 at $1864. Silver is down 11¢ at $25.25. M&T Research Group believes silver supply and demand dynamics are setting up for a big move in prices. The current trading range, it says, offers an “excellent buying opportunity” for long-term investors.

“The ‘poor man’s gold’ is setting up for a massive move higher on the back of market fundamentals and price action technicals,” it says in a detailed analysis posted at the Seeking Alpha website. “Supply and demand dynamics in the silver market are already indicating a deficit building in the market with inflows in ETFs amidst industrial and investment demand building on the back on inflationary pressures and other fundamentals similar to the experiences of the gold market. … Amidst these developments, inflationary pressures caused by money supply increases that have only begun to rear its ugly head in the organic economy only serve to fuel the bullish case for silver.”

Chart of the Day

Silver Price
(1971 to present)
bar chart on price of silver from 1971 to Nov 2021
Chart courtesy of TradingView.com • • • Click to enlarge

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Gold slips in early trading, giving back some of its recent gains
London-based analyst sees gold as a kind of bond with some very alluring characteristics

(USAGOLD – 11/12/2021) – Gold slipped in early trading, giving back some of the strong gains of the past several days. It is down $6 at $1857.50. Silver is down 19¢ at $25.11. Investors appear to be coming around to the notion that inflation might be a bigger problem than advertised, and the precious metals have been among the beneficiaries. Gold has gained 4.2% over the past seven trading sessions. Silver is up 5% during the period. It is with gold’s constancy in mind (Please see our Chart of the Day) that London-based analyst Charlie Morris says we should view gold as a kind of bond.

“In asking what kind of bond it is,” he says in the November edition of Atlas Plus, “I came up with five answers: It is a zero-coupon because it pays no interest. It has a long duration because it lasts forever. It is inflation-linked, as historic purchasing power has demonstrated. It has zero credit risk, assuming it is held in physical form. It was issued by God. That means gold is simply a zero-coupon, long-duration inflation-linked bond. It compensates you against past debasement and is impacted by the expectation of how rates and inflation will change in the future. It works.”

To explain gold’s recent restraint in the face of sharply rising inflation, Morris turns to investment analyst Russell Napier, who he calls the guru of gurus. “I’m very bullish on gold,” says Napier. “The problem for gold in the last year was that interest rates have gone up, because people still believe there will be a link between inflation and interest rates. If people believe there will be inflation at 4%, they will say interest rates will ultimately be at 5 or 6%, hence they don’t want to own gold. It’s only when they begin to realize that that link is broken, that the gold price will lift off.”

Chart of the Day

Annotated chart showing the price of gold during the gold standard and fiat money eras
Click to enlarge

Chart note: This chart is central to understanding why gold continues to make sense as a long-term portfolio holding. When the United States abandoned the gold standard in 1971 and freed currencies to float against the dollar, the fiat money era began. We are still in that era today. This chart shows gold’s performance from the early 1900s to 1971 when gold backed the dollar and the era from 1971 to present when it did not. Of course, gold has had its ups and downs since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.

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Gold advances sharply in Asia on rising wholesale inflation, cools in early U.S. trading
Fed policy ‘a Goldilocks environment for the metal’

(USAGOLD – 11/11/2021) – Precious metals advanced sharply in overnight Asian trading, reflecting the fact that inflation is a growing concern not just in the United States but around the world. Yesterday China, already experiencing record demand for gold, reported an annualized 13.5% rise in producer prices. Overnight Japan reported an 8% increase in its wholesale inflation rate. At one point gold was up $16 during Asian trading hours and silver 46¢. The metals, though, gave up some of those gains in early US trading. Gold is currently up $9 at $1859.50, and up 3.75% on the week. Silver is up 28¢ at $24.96, and up almost 4.8% on the week.

“Gold’s recent rally,” writes Bloomberg’s Eddie Spence in an article headlined Gold Is Back in Vogue, “shows that the market doesn’t expect the Fed – which last week announced the pace of its bond-buying tapering – to do much more to tackle inflation right now. That’s creating a Goldilocks environment for the metal, where inflation erodes bond yields that are kept in check by stimulus measures, burnishing the appeal of non-interest bearing assets like gold.”

Chart[s] of the Day

Japan producer price change
(%, 2016 to present)

Bar chart highlighting recent wholesale price increases in China

China producer price change
(%, 2016 to present)
bar chart highlighting wholesale price increses in Japan
Charts courtesy of TradingEconomics.com
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Gold declines moderately in early trading
FXStreet analyst sees dollar selling, gold pushing higher if Brainard gets Fed nod

(USAGOLD – 11/10/2021) – Gold declined moderately this morning in advance of the consumer inflation report due shortly. It is down $6 at $1827.50. Silver is down 9¢ at $24.28. For the past few months, the reappointment of Fed Chair Powell has been a foregone conclusion. Over the past several days, though, political crystal ball gazers have elevated Fed governor Lael Brainard’s status to that of legitimate contender. Yesterday FXStreet’s Justin McQueen speculated on what a Brainard chairmanship might mean for the gold market.

“[G]iven that Brainard is considered to be more dovish than the already dovish Chair Powell,” he wrote, “should Brainard be confirmed as the next Fed Chair, the initial reaction is likely to be one of US dollar selling, alongside US treasuries and gold pushing higher, particularly given that bookmakers remain heavily in favour of Powell being renominated.” As for the price of gold, McQueen says that it is “back at familiar resistance at $1833, which marks the 61.8% Fibonacci retracement of the $1450-2071 range. The level also coincides with the trendline stemming from all-time high, increasing the significance of the area, which has rejected gold topside on several occasions from July. Therefore, a close above would be a significant development for bulls and open the doors to $1860-75.”

Chart of the Day

Silver Price
(Percent increase or decrease over the prior year, 2000-2020)
bar chart showing annual average gains in silver 2000 to 2020

Data source: macrotrends.net • • • Chart by USAGOLD.com • • • Click to enlarge

Chart note:  In 2020, silver recorded its best percentage gain in a decade – 46.3% – and posted its third-largest gain over the 20 year period. It has posted gains – sometimes significant – in twelve of the last twenty years. So far in 2021, silver is down about 11.5%.

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Gold steady in quiet early trading ahead of upcoming inflation reports
Lundin sees much higher prices ahead as the ‘Fed’s ‘impotence is revealed.’

(USAGOLD – 11/9/2021) – Gold held steady in quiet early trading ahead of today’s much-anticipated wholesale price report. Tomorrow we get the second half of the monthly inflation picture when the government releases its October consumer prices report. The yellow metal is level at $1826. Silver is down 9¢ at $24.43. Some analysts view last week’s Fed’s tapering announcement as a future deterrent to higher precious metals prices. Others, like Gold Newsletter’s Brien Lundin, see it as an inducement for bigger and better things to come.

“As I write, the 10-year yield has fallen from 1.582% to 1.465%,” he wrote in an advisory released this past Friday. “I’ll let the pundits ponder the reasons why yields are falling as the Fed’s support for the market is waning, but many also view gold’s typical rebound on tightening news as being illogical. I think it’s all a part of how the markets no longer trade on fundamentals post 2008, and are purely driven, at least in the short term, by the shifting fancies of the algos and hot-money traders in futures. Those same factors are what have kept the metals corralled as monetary and fiscal policies have fueled rampant inflation, and perhaps those traders will now get behind the metals and help them make up for lost time. Regardless, the end result – manipulation or not – will be much higher prices for gold and silver as the Fed’s impotence is revealed. So we’d better be ready.”

Chart of the Day

Gold price and the yield on 10-year inflation-indexed security

overlay chart showing the price of gold and the net yield on the 10 year inflation indexed security
Sources: St. Louis Federal Reserve [FRED], Federal Reserve Board of Governors, ICE Benchmark Administration • • • Click to enlarge

Chart note: As you can see in this chart, declining real rates have had a direct effect on the price of gold, particularly noticeable in the period after the 2007-2008 credit collapse and the pandemic-induced economic crisis that began in early 2020. The inflation-indexed real rate of return on the 10-Year TIPS is fluctuating around the 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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Gold hold’s steady on shifting inflation sentiment
Analyst says taper announcement could be ‘buy on the news event’ for monetary metals

(USAGOLD – 11/8/2021) – Gold held steady in quiet early trading as financial markets weighed shifting sentiment on the inflation issue and a generalized retreat from higher rates among central banks, including the Federal Reseve. This week the US government will bring the price picture into clearer focus with the release of its wholesale price report on Tuesday and consumer prices on Wednesday. Gold is level at $1819.50. Silver is up 10¢ at $24.32. Market strategist Paul Wong sees the Fed’s tapering announcement last week as a possible “buy on the news event” – a process that may have taken its first steps on Friday when gold gained $26 to push solidly over the $1800 mark – finishing at $1819.50.

“[T]he Fed is in a quandary,” he says in a lengthy review of gold’s prospects posted at the Sprott website. ‘”It will either have to tighten conditions to head off inflation and risk slowing growth even further, or the Fed will remain accommodative to continue growth and risk broadening and pushing inflation. Either option will elevate market risk conditions. Gold is likely to react positively to either scenario, with the higher inflation one being more immediate. Either way, precious metals positioning has been brought down to low enough levels that any upward pressure would see prices advance meaningfully. We believe that precious metals are set up for a squeeze higher and are simply awaiting a catalyst. Remember, catalysts speed up reactions, and there appear to be several sources of potential activation energy for gold.”

Chart of the Day

Fed balance sheet growth and the price of gold
(2005-2021, log scale)

overlay line chart showing the Fed balance sheet and gold price 2005-present
Sources: St. Louis Federal Reserve [FRED], Board of Governors Federal Reserve System, ICE Benchmark Administration

Chart note: This chart tracks the relationship between Federal Reserve balance sheet growth (quantitative easing) and the price of gold. The first episodes of quantitative easing (QE1-QE3) began in late 2008 with the onslaught of the credit crisis and ended in 2014. The second (QE4) began in 2020 with the beginnings of the covid pandemic. This past Wednesday, the Fed announced it would start reducing its bond purchases later this year at $15 billion per month. Tapering is a slowing, not an end, to Fed bond purchases.

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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
(1913-present)
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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