The Indian central bank has announced another round of demonetization with a plan to withdraw 2,000-rupee notes from circulation. The announcement led to a big jump in gold bullion sales.
The 2,000-rupee note will remain legal tender, but they will have to be deposited or exchanged for smaller denominations by Sept. 30.
The debt ceiling fight is getting down to the wire. In a letter to Congress on Monday, Treasury Secretary Janet Yellen said that without a debt ceiling increase, it was highly likely the government wouldn’t be able to meet all of its obligations by “early June, and potentially as early as June 1.”
Despite the drama, I still expect Congress to get a deal done. And that’s when the real problems begin.
Federal Reserve Chairman Jerome Powell and former chair Ben Bernanke recently fielded questions together at the annual Thomas Laubach Research Conference put on by the central bank. They engaged in a lot of finger-pointing but didn’t offer a hint of self-reflection as they discussed inflation and the state of the economy.
We’ve talked about the recent selloff in gold. On the other side of the coin, the NASDAQ has made a string of 52-week highs. What is driving these market dynamics?
The Fed.
The markets generally believe that the Federal Reserve is finished hiking interest rates, or at least close enough to being done that a rate cut is on the horizon.
And they’re wrong.
Gold had dropped by over $100 in the last two weeks. Meanwhile, the dollar rose to a 7-week high on May 17. If you’re thinking that this looks a lot like how gold and the dollar moved at the height of the Federal Reserve’s inflation fight, you’re right. That’s because the central bankers at the Fed have stepped up the hawkish rhetoric in the last couple of weeks increasing expectation that interest rates will stay higher for longer.
But talk is cheap. The real question is how will the Fed respond when the bottom drops out of the economy.
On an annual basis, the Consumer Price Index (CPI) increased by 4.9% in April. While that’s an improvement over last year, it’s still not good. It’s more than twice the Federal Reserve inflation target. And as Peter Schiff pointed out during a recent interview with Jesse Kelly, the reality is even worse than the numbers indicate.
Laws recently enacted in Florida and Indiana ban the use of a central bank digital currency (CBDC) as money in those states.
Was the producer price data that came out late last week really more good news on the inflation front?
That’s certainly how the mainstream media spun it. But as was the case with the April CPI data, the mainstream spin didn’t necessarily reflect reality.
In fact, there is a pro-government, pro-official narrative bias that pervades the mainstream media, including the financial media.
The US government ran a surplus in April, as it generally does in tax return month. But federal tax revenues collapsed year-on-year and the fiscal 2023 deficit is still close to $1 trillion despite the small April windfall.
For the second straight month, gold flowed into ETFs in April.
Globally, gold-backed ETFs reported net inflows of 15 tons last month, reflecting an increase of about $824 million.