Inflation is sizzling hot. Gold has historically served as an inflation hedge. So, why hasn’t gold caught a bid?
In a word, confusion.
Taper tantrums and fear of Fed rate hikes have generated massive confusion in the markets. People are selling gold when they should be heavily buying gold in the dips.
And at the root of this confusion is the failure to account for real interest rates.
In October, Chinese gold imports reached the highest level since December of 2019 as the market continues to recover after taking a hard hit during the coronavirus pandemic.
According to the latest data from Chinese customs, the country imported 123 tons of gold in October. That was a 38-ton month-on-month increase.
China ranks as the world’s number one gold consumer.
Labor market productivity has been dropping for decades. And you can trace the plunge back to the demise of the gold standard.
US labor market productivity plummeted in the third quarter of 2021. Revisions to the data showed a 5.2% drop in productivity, even worse than the dismal initial reading last month. It was the worst productivity decline since 1960.
Taper? What taper?
Last week, the Fed announced that it plans to speed up the pace of its asset purchase taper. But so far, this taper hasn’t been very impressive. Between Dec. 8 and Dec. 15, the Fed added another 92.1 billion to its balance sheet, expanding it to a record $8.757 trillion.
Last week, the Fed sped up its timetable for tapering its asset purchases and raising interest rates. While this represents a slightly tighter monetary policy, it’s far from truly tight. And yet, the central bankers at the Fed and a lot of people in the mainstream seem to think these small steps will tame the inflation dragon. In fact, this slight tightening is a little like taking a pea shooter to a bazooka fight.
Despite finally acknowledging inflation will likely runner hotter and last longer than expected, there is still widespread belief that it is transitory in the long run. After all, we had a couple of decades of tame inflation, and that’s now viewed as the norm. In this podcast, Peter Schiff explains why the only thing that’s transitory is the era of low inflation.
Gold looked very strong through mid-November. Trends in September and October had been pointing to a breakout. The market delivered sending gold up through $1870. Unfortunately, hard resistance kept the bulls in check, despite repeated attempts to breakthrough.
The previous price analysis presumed that a Brainard nomination at the Fed would be the catalyst needed to break through $1880. It also assumed that a Powell nomination, though expected, would bring gold back down to some extent.
Unfortunately, the gold market took the Powell news harder than expected.
Gold inventories in Comex vaults increased for only the second time since February this year.
This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults.
‘Tis the season for Christmas specials.
I’m not going to lie – even as a grown man, I love watching Christmas specials. Snoopy decorating his dog house. The Grinch folding up the Christmas tree like an umbrella and stuffing it up the chimney. And Frosty the snowman melting in the greenhouse.
We got more bad inflation news this week as the Federal Reserve wrapped up its final FOMC meeting of the year. Supposedly, the central bank has launched its war on inflation. Has it though? In this episode of the Friday Gold Wrap podcast, host Mike Maharrey talks about inflation and the Fed meeting and explains why it looks more like the Fed is taking a pea shooter into a bazooka fight.
In October, retail sales surged much higher than expected, rising 1.7%. The mainstream gushed over retail spending, asserting that it was a sign that the economy is booming. At the time, I argued that it wasn’t necessarily good news.
Well, the news just got even worse. Retail sales in November disappointed, despite another big surge in inflation.
