May 2022 - Week 2 Edition
Gold at Record High in Euros
Gold is Trading Up 2% for the year, which is somewhat amazing in light of the U.S. Dollar’s near 10% gain this year and its 15% gain in the last 12 months. The U.S. Dollar Index (DXY) was 90.1 on this date last year and it is 103.8 now (+15.2%), which means that if gold is slightly up in U.S. dollar terms, then it is massively up in terms of many other currencies. Indeed, gold is now trading at record highs in euros.
The April Consumer Price Index Rose More Than Expected – Buy Gold Now!
On Wednesday morning, May 11, the Biden Administration was hoping to proclaim the “end of inflation” by saying it peaked in March. That was one reason President Biden gave his “pre-buttal” speech on inflation on Tuesday, attempting to discredit the inflation figures in advance by proclaiming that 50% of inflation was the fault of Covid and 50% was Putin’s fault. The undertone of his message was that he shouldered no blame for giving away billions of dollars nor did the U.S. Federal Reserve for printing cash at will. But the April Consumer Price Index (CPI) came in one tenth higher than expected (+0.3% vs. +0.2%) and the “core” rate—which excludes the more volatile food and energy prices—increased by 0.6% on the month, a doubling from March’s 0.3% “core” gain, providing a sign of broad-based inflationary pressure. In addition, the 12-month aggregate increase was still at a 40-year high of +8.3%, far exceeding wage gains.
In addition, airline fares surged 18.6% in April from the prior month, the fastest rise on record. Restaurant dining prices rose 0.9% (an 11% annual rate), the most since October. One analyst defied President Biden by saying, “Inflation is no longer just contained to the supply chain — these pressures are actually becoming more broad-based,” according to Aneta Markowska, chief financial economist at Jefferies LLC.
In general, inflation doesn’t hurt well-off people who own their homes or have fixed mortgages at low rates, or who work from home or have a short commute and have few or no children to feed and educate. However, for the typical family with multiple children and two working parents with long commutes and rising housing costs, this recent surge of inflation is a budget killer. Recent studies have shown that rising wages have not kept up with the three major pocketbook issues for most households – food, energy (for heating, cooling and commuting), and housing costs (primarily the monthly rent or mortgage note).
The tight labor market has boosted average hourly earnings by 5.5% over the last year, through April, but Consumer Prices were 8.3% above last April, so consumers are almost 3% behind, not counting a higher tax bracket for higher income in many cases. Moreover, wage gains are starting to recede as employers are seeing slower business gains in a declining market for most products with the GDP declining in the first quarter of 2022: Wages grew by only 0.3% in April, the second slowest rate in the last eight months.
Gold is a well-known inflation hedge, so gold rallied on the CPI increase Wednesday, and it may rally further on Thursday’s release of the commodity-oriented Producer Price Index (PPI) for April. Buy Gold Now!
We Recommend Silver Bars or Rounds (or Alternative Coins) for Larger Silver Bullion Purchases -- Not the 2022 American Silver Eagle
A continuing shortage of silver and silver blanks available to the U.S. Mint makes the American Silver Eagle a poor selection in this year’s silver market. It is a poor selection for large quantity purchases; however, American Silver Eagles are still great for collectors and for gift giving in small quantities.
There are delays in production and delivery and huge price markups on the order of $13 or more above spot silver prices, which is not practical for larger orders of bullion coins. Imagine paying more than 50% over spot when you can buy the same amount of silver in the same Brilliant Uncirculated condition for just 10% or 20% over spot prices. With silver recently around $22 per ounce, imagine paying $35 for a silver bullion coin!
Silver bars and rounds are far better buys for as little as about $3 over spot per ounce (for 10 ounces) or about $2 over spot per ounce for a kilogram, or the 2022 Great Britain Silver Britannia for about $5 over spot in BU condition. Call your account representative and discuss the array of best choices at current premiums and prices. Buy Silver Now!
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