The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
The World Cup kicked off this week. The international soccer tournament is the most-watched sporting event in the world. Over the next several weeks, teams from 32 countries will compete for the coveted FIFA World Cup Trophy.
Speaking of trophies, have you seen any of the footage of Alexander Ovechkin and his Washington Capital teammates partying with the Stanley Cup? It has been – as some might say – off the chain.
If you saw the headlines about the latest retail sales figures, you probably noticed adjectives like “hot,” “booming” and “sizzling.” Total retail sales including food services were up 5.9% year-on-year in May.
That’s an impressive number until you factor in inflation. In fact, a decline in the dollar’s purchasing power accounted for nearly half the gains in retail sales.
As expected, the Federal Reserve nudged rates up another .25 basis points on Wednesday. Perhaps more significantly, the Fed took a more hawkish tone than expected, signaling it would likely increase rates two more times this year for a total of four hikes. The central bank had been projecting three 2018 rate increases.
A buildup in inflation pressures was a major reason for the Fed’s more hawkish tone. According to the latest data released by the Bureau of Labor and Statistics, the Consumer Price Index (CPI) jumped by 2.8% year-over-year in May. The central bankers projected inflation will likely run above their 2% target into the near future. Analysts expect the CPI to hit 2.1% this year and run at that level through 2020.
In his latest podcast, Peter Schiff said higher inflation might be a victory for the Federal Reserve, but it will be a big loss for consumers. In fact, we are heading for a no-growth, high-inflation economy.
The following article was written by Peter Schmidt. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
When currency was backed by gold, a central bank’s main function was to maintain the value of the issued currency in terms of gold. For example, if a central bank created too much money against the gold reserves in the banking system, an increasing number of people would begin to exchange their currency for gold. To combat this, a central bank would be forced to raise interest rates and decrease the money supply. The higher interest rates would incentivize people to exchange gold for larger savings on deposit that earn interest. Banking reserves – gold – would return to the banking system and the economy would return to balance. The prime reason for insisting on defining currency in terms of a precious metal was to provide a self-correcting braking mechanism to the creation of money. As expressed by the great Wilhelm Röpke:
The Chinese gold jewelry market reversed three years of declines in 2017, marking its first gain since a 2013 boom. According to a report released by the World Gold Council, the modest increase in gold jewelry demand last year could mark a return to sustained growth thanks to continued efforts to reinvigorate the industry through innovation, along with growing Chinese incomes.
The Chinese jewelry market is an important component in the overall global demand for gold. Jewelry accounts for more than half the yearly gold demand, and the Chinese make up about 30% of the gold jewelry market.
Over the last 12 months, the purchasing power of your dollar has dropped at the fastest rate since 2011.
According to the latest data released by the Bureau of Labor and Statistics, the Consumer Price Index (CPI) jumped by 2.8% year-over-year in May. That follows on the heels of a 2.5% leap year-over-year in April.
In other words, prices are going up. That’s not good news for people who buy stuff.
Mongolia wants more gold.
Last week, the Bank of Mongolia launched a campaign dubbed the “National Gold to the Fund of Treasuries.” The goal of the five-month campaign is to encourage miners and individuals to sell gold to the central bank, along with commercial banks, in order to increase their gold reserves.
World Gold Council chief market strategist John Reade recently talked to Commodity TV about the current state of the gold market and what he sees in the future.
Reade cast an optimistic tone, saying the supply and demand fundamentals point toward a healthy, growing gold market moving forward.
US productivity numbers for the first quarter of this year were disappointing, to say the least. Analysts expected Q1 productivity to rise by point 0.7%. Instead, it came in at nearly half that, rising by 0.4%. This was only a slight improvement over the 0.3% increase in the final quarter of 2017.
There wasn’t a whole lot of chatter about sluggish productivity in the mainstream financial press, but in his recent podcast, Peter Schiff pointed out that it could have significant ramifications for the economy – and on your pocketbook. If you’re counting on productivity to keep a lid on consumer prices, you have a big problem.
