Inflation is back. So what does this mean for gold?
The consumer price index came in hotter than expected at 2.1%. A CNBC report said the number “pushes the economy toward a potential danger zone for inflation.”
The Babylon Bee captured the current state of the Republican Party in all of its hypocritical glory. The satirical website proclaimed “Republicans announce plan to pretend to be fiscally conservative again the moment a Democrat takes office.”
The GOP said it would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as political power swung back to the opposing party.
“‘The second a Democrat is back in the White House, we will once again start yelling about fiscal responsibility,’ Speaker Paul Ryan said in an address to the House of Representatives Friday. ‘For now, we will continue to vote for unsustainable and irresponsible budgets that your children’s children’s children will pay for for centuries to come.’”
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 bears were running on Wall Street again Thursday, as the Dow Jones suffered another steep tumble. After a record drop of 1,175 points Tuesday and a rebound Wednesday, the Dow shed another 1,333 points.
The Dow Jones dropped 6.5% in four days. That’s the steepest decline in any week since October 2008. The S&P 500 has shed 6.6% of its value this week, its second-worst drop since 2008. The NASDAQ has also tanked, giving up all of its 2018 gains.
As Peter Schiff put it in his most recent podcast, “This market is looking ugly.”
They call it the business “cycle” for a reason. Cycles repeat.
As Peter Schiff pointed out in a recent podcast, the financial crisis was triggered by rising interest rates on the debt that had been accumulated in the years prior as a result of the Federal Reserve keeping interest rates at 1% for a year-and-a-half and then slowly raising them back up over the course of another year-and-a-half.
Friday, the Dow Jones fell more than 600 points. It was the third big drop in a week. Most analysts mention nervousness about sharply rising bond yields as one of the reasons for the selloff. And what do rising bond yields reflect? Rising interest rates. So, are we seeing the beginning of the next big downturn in the business cycle?
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.
Peter Schiff recently attended the Vancouver Resource Investment Conference. While he was there, he did an interview with Daniela Cambone of Kitco News.
Peter and Cambone talked gold, and Peter said he thinks the yellow metal is set to soar, despite the sentiment that Federal Reserve Rate hikes will hold gold down.
Gold has not really rallied. It’s been going up, right? But it’s been creeping higher. Now, everybody expected it to fall. Everybody believed that as soon as the Fed hiked rates, gold’s gonna tank. And it didn’t tank. It rallied.”
Over the last two years, the Federal Reserve has been nudging interest rates higher and their efforts are starting to bear fruit in the marketplace. Bond yields are beginning to climb.
The question is how high can rates go before the house of cards the central bankers built comes tumbling down?
Ten-year bond yields have hit their highest level since July 2014.
Meanwhile, the stock market has gone up about 45% since that time. Contrast that with earnings that have increased just 6%. As Peter Schiff pointed out in his most recent podcast, a lot of the justification for that increase in stock market valuation has been lower interest rates.
Well, they’re not lower anymore. They’re back exactly where they were in July 2014. But what’s more ominous is not where they are but where they’re headed.”
We’ve written extensively about the stock market bubble blown up by artificially low interest rates and Federal Reserve quantitative easing. But stocks aren’t the only asset bubble out there. In fact, 2017 may go down as the year of the bubbles. And the new housing bubble is one that seems to be floating under the radar.
Financial manager James Stack has noticed it. He predicted the housing crash in 2005, and he told Bloomberg the housing market is flashing red again.
It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial. People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”
