Peter Schiff put it pretty bluntly in a podcast last week. We don’t have a booming economy. We have bubbles. And it looks like the air is starting to come out of some of those bubbles. We see signs of trouble, particularly in interest rate-sensitive sectors such as real estate. As just one example, home sales in California have hit the lowest level in a decade. And it’s not just California. We’re seeing declines in many of the “most splendid housing bubbles” in America. Even more troubling is that we’re seeing these tremors and interest rates aren’t historically high.
Yet.
But they are rising quickly. According to an article in Wolf Street, they may soon hit 6% and that could be the real tipping point.
Generally, when the mainstream talks about gold, you get a negative spin. So, whenever I see anybody in the mainstream talking positively about the yellow metal, I sit up and take notice. Well, MarketWatch had some positive things to say about gold recently, calling it “the best house in bad neighborhood” for 2019.
Last week, we got data on the producer price index. It came in at o.6%, a much hotter number than expected. It was the biggest jump in the PPI in six years. Year-over-year, producer prices are up 2.8%.
Analysts expected the monthly increase to come in at half that – 0.3%. While the Fed typically looks at consumer prices to gauge inflation, producer prices are also significant. After all, the cost of production is ultimately passed on to the consumer.
As soon as that PPI number came out, the price of gold dropped about $10. As Peter Schiff pointed out in a recent podcast, this is because the markets still don’t get it. They are playing checkers instead of chess.
The silver-gold ratio hit the highest level in over a quarter century this week.
The ratio hit to 86:1 as dollar strength pulled both the price of silver and gold lower this week after the Federal Reserve indicated it plans to keep pushing interest rates higher. The price of silver fell even more steeply than the gold price. A research note by Commerzbank said it was that largest gap between the two metals in 25 years. Practically speaking, this means silver is undervalued compared to gold.
Despite all of the warning signs, the mainstream is still convinced the “economic boom” will continue and the Fed will keep pushing interest rates up. As a result, the price of gold has stayed relatively low. But as Peter pointed out in his most recent Gold Videocast, their complacency is ill-advised, and gold is a mispriced asset. Now is the time to buy.
Americans took on another $10.9 billion in debt in September, according to data released by the Federal Reserve. That pushed total consumer debt to a seasonally adjusted $3.95 trillion. American indebtedness is growing at a 3.3% rate.
But there are signs that American credit card borrowing is slowing down and that’s not good news in an economy built on consumer spending and debt.
Central bankers and politicians actively intervene in the gold market. This may sound like a tin foil hat conspiracy theory, but there is plenty of evidence right out in the open. Chris Powell co-founded the Gold Anti-Trust Action League (GATA) to expose the scheme. In this episode of It’s Your Dime, host Mike Maharrey and Powell talk about how government’s and central banks manipulate the market using “paper gold,” and what it means to you.
As the stock market was tanking last month, Peter Schiff said a recession is obviously coming. Now things have calmed down a little bit and everybody seems convinced October was just a bad month — a needed correction. But as Peter has been saying, there are some fundamentals everybody is ignoring that look really bad. The housing market, in particular, is showing signs of trouble. In fact, we don’t have a booming economy; we have a bubble.
In an article published on Seeking Alpha, Mad Genious Economics provides an in-depth breakdown of an economy rolling over, focusing specifically on housing and auto markets, the trade war and banking.
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.
Last Friday, I told you where you can get coffee with real gold mixed into it. It’s part of this trend of edible gold. People are mixing gold into all kinds of foods — even beer and chicken wings. Like I said last week, I think people like to eat gold because it seems indulgent and decadent. Not my thing, but I get it. But you know what? There’s a more pragmatic reason to eat gold.
Transportation.
