In the weeks leading up to the December Federal Reserve rate hike, the price of gold fell and most mainstream analysts were bearish on the yellow metal. After all, rising interest rates are bad for gold. right? But we took a contrarian position, saying the negative relationship between rising interest rates and the price of gold is really more of a “sell the rumor, buy the fact” phenomenon.
As it turns out, we were right. In the weeks since the Federal Open Market Committee nudged the interest rate up another 25 basis points on Dec. 13, gold has outperformed most other major assets.
As the GOP tax plan wound its way through Congress, we argued that it is not going to create the kind of economic benefits promised without some reduction in the size and scope of government. We don’t just need tax relief, we need government relief. But there don’t appear to be any serious efforts to cut spending or to reduce the size of the federal government on the horizon. In fact, it looks like D.C. is hurtling in the exact opposite direction. With tax reform in the rearview mirror, Pres. Trump has set his eyes on a federal plan to “fix” America’s infrastructure.
This is a Keynesian boondoggle of epic proportions. And as Ryan McMaken shows in the following article originally published at the Mises Wire, it isn’t even necessary. We don’t need a federal solution to the infrastructure problem. Not for practical purposes. And not to “stimulate” the economy. In fact, the borrowing and money printing that will be necessary to finance whatever plan the politicians in D.C. come up with will compound the country’s economic woes.
The US gold market went into a deficit last year despite sluggish American demand, according to analysis by SRSrocco.
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.
I’ve mentioned this several times in these Fun on Friday columns, but the whole phenomenon of eating gold fascinates me.
Because, really, it’s kind of weird.
On Dec. 31, 2016, the price of gold stood at 1,156.00. Today, it is knocking on the $1,300 mark. The yellow metal is on track to gain about 12% in 2017, its best year since 2010. Gold has made these gains despite a number headwinds that we would expect to put a significant drag on gold.
Here are seven major themes that have driven gold news over the past year.
When it comes to Bitcoin, you can count on one thing – volatility.
The price of Bitcoin plunged more than 11% Thursday morning, dipping below the $14,000 level after the South Korean government announced plans to more tightly regulate cryptocurrencies.
Last month, we reported on a Bank of America survey that indicated the mainstream has started to acknowledge that the stock market is a big, fat, ugly bubble.
The latest fund-manager survey by Bank of America Merrill Lynch found that a record 48% of investors say the US stock market is overvalued. Meanwhile, 16% of investors say they are taking on above-normal risk. BoA chief investment strategist Michael Hartnett called this “an indicator of irrational exuberance.”
Now, even the government has taken notice, acknowledging asset prices are floating in dangerous bubble territory.
We talk a lot about how central banks serve as the primary force driving the business cycle. When a recession hits, central banks like the Federal Reserve drive interest rates down and launch quantitative easing to stimulate the economy. Once the recovery takes hold, the Fed tightens its monetary policy, raising interest rates and ending QE. When the recovery appears to be in full swing, the central bank shrinks its balance sheet. This sparks the next recession and the cycle repeats itself.
This is a layman’s explanation of the business cycle. But how do the maneuverings of central banks actually impact the economy? How does this work?
The Yield Curve Accordion Theory is one way to visually grasp exactly what the Fed and other central banks are doing. Westminster College assistant professor of economics Hal W. Snarr explained this theory in a recent Mises Wire article.
As we pointed out a few weeks ago, we’ve now entered the prime time to buy Christmas cards, decorations, and wrapping paper. Why? Because with Christmas in the rearview mirror, Christmas stuff is all on sale.
There are a lot of reasons to believe gold is also on sale right now.
The investment world has focused most of its attention on stock markets and cryptocurrencies over the last few months. But as an article recently published in Forbes points out, there are at least 10 good reasons to believe now is the time to buy gold.
