August 2021 - Week 1 Edition
Gold Closes Higher in July
Gold Rose Over $60 in July (+3.5%) from $1,763 to over $1,825. The other precious metals have not followed since this is mainly a play on inflation, safe havens, fear and a recent drop in the dollar. All are engines of gold’s growth rather than fuels for industrial demand, which tend to lift silver and platinum group metals. Gold is also rising since inflation has remained more stubborn than the Federal Reserve expected, which Fed Chairman Jerome Powell has finally admitted. This past Friday, the Fed’s favorite inflation indicator rose 3.5%; its highest jump since 1992 and double the Fed’s anticipated rate as of the start of 2021, when they predicted inflation would be 1.8% for all of 2021.
During July, the major stock market indexes rose by 1% to 2%, although the Russell 2000 small stock index continued to decline. However, gold beat all the major stock market indexes by rising 3.55%, even though the other three precious metals declined slightly.
President Biden Believes the More We Spend, the Less Inflation We’ll See
Twice in one week, President Biden indicated the more we spend, the more prices go down! First, on Monday, July 19, he said that more government spending “will be a force for achieving lower prices for Americans.” Then, on Wednesday, June 21, he said during a live CNN town hall broadcast that his multi-trillion-dollar spending spree will “reduce inflation.” We wonder on which planet the President lives. Perhaps it’s the same planet where the Fed Chairman Jerome Powell says inflation is transitory.
The Fed Chair has finally admitted that he may be wrong. In his press conference on Wednesday, July 28, Powell conceded the strength and length of the inflation siege has caught him by surprise. As we have repeatedly said here, the Fed Governors (and the President) ought to get out and try to buy a tank of gas or a week’s worth of groceries once in a while to see what the American public experiences every week.
At the start of this year, the Fed predicted inflation would only rise 1.8% for all of 2021. By March, they bumped that prediction up to 2.4%. In June the Fed raised their forecast to 3.4%, nearly double the forecast of six months earlier. They are off by nearly 100% in just the last seven months!
In the past 18 months, the Fed’s balance sheet has virtually doubled from $4.1 trillion to $8.2 trillion. In which universe does that lower prices? Does the President think doubling the money supply reduces inflation?
Steven Moore, economic advisor to President Donald Trump, countered: “Government spending causes inflation. If these policies worked, Argentina, Mexico and Zimbabwe would be the richest countries in the world.”
I highly recommend buying hard assets monthly like gold bullion and rare coins. When it comes to rare coins, we have placed over 500 new bids this week on dealer networks for our customers. Despite the modest decline in gold and silver bullion this year, the bids and prices on most of these rare coins are up over 15% to 25% since January. This includes almost all of our “Program 2020” coins, which are based on low population reports, low capitalization, and their inherent beauty and popularity. They include some of the $2.50, $3.00, $5.00 Indians, $20 Liberties, $10 and $25 American Gold Eagles. Call your account representative today and periodically to see what coins are available.
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