September 2022 - Week 2 Edition
Silver and Gold Looking to Make a Turnaround
Silver soared by over $1 an ounce on Monday, September 12, rising from $18.80 to $19.85, touching $20 at one point. Gold also rose Monday, as the U.S. dollar finally took a dip, with investors waiting for the release of the Consumer Price Index (CPI). On Tuesday morning, the CPI came in “hotter” than expected, which sent both stocks and gold down, since that implied more rate increases down the line.
Last week, gold rose for the first time in four weeks, on hopes that next week’s interest rate increase would be the last. The U.S. Dollar Index (DXY) hit a 20-year high last week, up 15% this year and +19% in the last 12 months. Without that strong rise in the dollar, gold would be up significantly this year, while as of last Friday, gold was up 7% in euro terms, 10% in the British pound and +15% in the Japanese yen. Gold’s value remains stronger related to foreign currencies.
“Core” Consumer Price Inflation is Double the Rate Expected
Inflation came in much higher than expected Tuesday morning. Consensus expectations called for the Consumer Price Index (CPI) to decline 0.1% (month over month) with the core reading (subtracting food and energy) rising 0.3%, but the actual numbers were a monthly gain of +0.1% with a “core” reading of +0.6% (a 7.5% annual rate, compounded). This was double the consensus expectation of the experts. The 12-month CPI increase is 8.3%, only slightly down from 8.5% in July and a peak of 9.1.% in June.
The CPI news came out an hour before the stock market opened, so market futures were hit hard first. Then the Dow Jones Industrial Average fell by 800 points in the first five minutes of trading and remained down 900 points at noon. After high inflation numbers like these, the Fed will find it increasingly difficult to say that inflation has “peaked” or is “transitory” or has been “solved.” The Fed is expected to continue raising rates after September 21st, and that is probably the reason why gold also declined.
Congressman Alex Mooney Looks into the Mint’s Chronic Silver Shortages and Delays
U.S. Mint sales of gold bullion coins declined in August but they were up for the year-to-date.
By contrast, silver bullion coin sales continue to decline, year-over-year, due to the shortage of silver “blanks” for minting new coins. This has caused Congressional Representative Alex Mooney, R-WV, to write a letter to Treasury Secretary Janet Yellen and U.S. Mint Director Ventris C. Gibson. Mooney is asking why they have allowed such long delays and high premiums for Silver American Eagles. In his letter, Mooney claims “a long-running production slowdown has led to shortages and dramatically higher market prices for this iconic silver coin as compared to its peers worldwide.”
Mooney alleges that Secretary Yellen is in violation of Chapter 31, Section 5112(e) of the United States Code that directs the secretary to ensure the minting and sales of quantities to meet public demand for the 1-ounce .999 fine silver bullion coins.
U.S. Code Ch. 31, Sect. (e) further states, “(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in qualities and quantities that the Secretary determines are sufficient to meet public demand, coins which (1) are 40.6 millimeters in diameter and weigh 31.103 grams; (2) contain .999 fine silver; (3)have a design (A) symbolic of Liberty on the obverse side; and (B) of an eagle on the reverse side; (4) have inscriptions of the year of minting or issuance, and the words “Liberty”, “In God We Trust”, “United States of America”, “1 Oz. Fine Silver”, "E Pluribus Unum" and “One Dollar”
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