The new Fed chairman has swooped into Washington D.C. like a hawk this week.
In his first testimony before Congress, Powell talked up the economy. He’s also indicated he plans to continue pushing interest rates higher. In fact, many analysts are now talking about four rate hikes in 2018, with the first on tap for this month. Powell said his personal outlook for the economy has strengthened since December, and he sees little risk for a recession.
In his latest podcast, Peter Schiff said Powell couldn’t be more wrong.
The federal debt keeps climbing upward and there is no indication that this has raised even a slight concern in Washington D.C.
We’ve been focusing a lot on the federal debt in recent weeks. We’ve explained that debt is a cancer on economic growth. We’ve raised the question: who is going to buy all of the Treasuries the government will have to sell to finance all of the debt. And we’ve talked about the impact of rising bond yields on the US budget as the cost of servicing the massive debt rises.
There’s a lot of bearish economic news when you factor the federal debt into the equation. But the spiraling debt might actually be bearish for gold. In fact, over the last two decades, there is a positive correlation between increased federal debt and the price of gold.
The dollar has shown some resilience this week. The dollar index clawed back after hitting multi-year lows last week. Meanwhile, gold saw its worst single-day decline in more than a year on Tuesday.
One thing that hasn’t changed is the upward pressure on bond yields. In his most recent podcast, Peter Schiff said he thinks this is the reason we’re still seeing some life in the dollar and downward pressure on gold.
Inflation came in hotter than expected at 2.1%. A CNBC report said the number “pushes the economy toward a potential danger zone for inflation.”
Analysts had expected January inflation to come in at 0.3, after being up by 0.1 the previous month. Instead, the December number was revised up to 0.2 and January came in at 0.5. As Peter Schiff pointed out in his podcast, if you multiply 0.5 by 12 months, it comes to 6% inflation per year.
In his Feb. 16 Liberty Report, Ron Paul talked about inflation and its effect on everyday Americans. He said when it comes to this subject, the mainstream is all mixed up. More significantly, the creation of new money doesn’t impact everybody equally. Some benefit at the expense of others.
Jim Rickards has been talking $10,000 gold for a while. This seems like an absurd number, but Rickards insists the dynamic exist to push gold to that level – when the world financial system collapses under its own weight.
Rickards has been making the rounds again lately, saying gold is in the midst of its third bull run and has plenty of room to go.
In my view, we’re in the third bull market of my lifetime. The first one was 1971 to 1980. Gold went up over 2,000%. The second one was 1999 to 2011. Gold went up 655%. We’re in a new bull market that started in December 2015. Gold’s up 27% since then. Gold was up in 2016-2017. First back-to-back year of gold gains since 2011-2012. So, 2018 will be a breakout year … we’re actually in the third year of a bull market with a very long way to run.”
According to an informal survey conducted by the nonprofit Professional Numismatists Guild, retailers anticipate gold will reach $1,460 this year, and perhaps climb even higher. They also like silver’s prospects, projecting the price to hit the $20 per ounce mark.
The dollar continued to tank Wednesday, hitting a 3-year low after Treasury Secretary Steven Mnuchin said he welcomed a weakening dollar.
The dollar index measuring the greenback against a basket of six major currencies slipped below 90 for the first time since December 2014. Meanwhile, gold climbed, hitting its highest level since August 2016.