Here’s a strange headline for you: “Gold prices near daily highs despite better-than-expected inflation in October.”
This headline is bizarre on a couple of levels. First, since when are rising consumer prices and good news? And second, why wouldn’t inflation be good for gold?
You really have to buy into the mainstream narratives to write that headline.
Fiscal 2020 started just like fiscal 2019 ended – with a massive federal budget deficit. And that has Federal Reserve Chairman Jerome Powell worried. In an ironic bit of political theater, Powell lectured Congress about the spending he helps facilitate.
The budget shortfall last month was 34% higher than the October 2018 deficit, coming in at $134.5 billion, according to the latest Treasury Department report. That starts fiscal 2020 off on track to eclipse a $1 trillion deficit.
American consumer debt pushed to a new record of $4.15 trillion in September. Part of that equation – the continued surge in the levels of student loan debt.
Student loan balances jumped by $32.9 billion in the third quarter this year, pushing total outstanding student loan debt to a new record of $1.64 trillion. Student loan balances have grown by 5.1% year-on-year.
Over the last decade, student loan debt has grown by 120%. Student loan balances now equal to 7.6% of GDP. That’s up from 5.1% in 2009.
Gold mine output has flatlined over the last several years and that trend appears to be continuing in 2019. In fact, some analysts believe we may be at or near “peak gold.”
According to the World Gold Council’s Gold Demand Trends Q3 report, gold mine output fell slightly with total mine production coming in at 877.8 tons in Q3. On a year-to-date basis, mine production stands at 2,583 tons. That’s virtually identical to production levels at this point in 2018.
Gold is the third-most consistently bought investment globally.
This was just one of many findings in the World Gold Council’s recently released consumer research report that revealed a strong global gold market with the potential for future growth.
Globally, there are clear perceptions of gold as a safe, durable, traditional store of value. As an investment, it plays to these strengths – retail investors buy it to protect wealth and create long term returns. Jewelry buyers treasure it for sentimental reasons and as a reward for success.”
Gold continued to flow into ETFs after breaking a record in September. Gold-backed funds took in another 44.4 tons of metal in October, pushing global holdings to another record of 2,900 tons, according to the latest data by the World Gold Council.
The previous record for ETF gold holdings was set back in 2012 when the price of gold was near $1,700 per ounce.
Consumer debt set another record in September, but the pace of borrowing appears to be slowing. This could signal trouble for an economy built on American consumers spending money they don’t have.
Total consumer debt grew by $9.5 billion in September, according to the most recent data released by the Federal Reserve. That represents an annualized increase of 2.8% and pushed total consumer indebtedness to a new record of $4.15 trillion (seasonally adjusted).
Uncle Sam is spending money far faster than he’s taking in. The US federal government ran the biggest budget deficit in seven years in fiscal 2019, according to the Treasury Department. And the spending is even worse than advertised.
The $984 billion deficit amounts to 4.7 percent of GDP. That’s the highest percentage since 2012. It was the fourth consecutive year in which the deficit increased as a percentage of GDP. The debt-to-GDP ratio is estimated to have increased a hefty 26 percent over last year.
Gold demand was up 3% in the third quarter, coming in at 1,107. 9 tons, according to the Gold Demand Trends Q3 2019 report put out by the World Gold Council.
Gold mine output dropped slightly, but a surge in recycling drove a modest gain in supply.
The central bank gold-buying spree shows no sign of letting up as countries seek to diversify their reserves away from the US dollar.
There were no significant gold sales by central banks in September.