April 2023 - Week 3 Edition

Gold is Holding Strong Ahead of Next Upward Move

Gold traded above $2,000 every day but two during the first two weeks of April, the longest string of $2,000 days in gold’s history, eclipsing the previous record from August 2000.  Gold then reached a mid-day high of $2,048 on the June futures contract on the COMEX last Thursday and Friday before profit-taking began after a rise in the U.S. Dollar on Friday, April 14 and Monday.  Silver surpassed $26 last week as several other commodities also rallied in April, following a rather tame Producer Price Index reading for March, released last week. It seems that inflation has not “cooled down permanently” but is rising again.

March Inflation Indexes Seemed “Tame” But April Inflation Has Soared Once Again

In the middle of each month, we see the key inflation numbers and the March numbers seemed tame when they were released last week. The Labor Department stated the March Consumer Price Index (CPI) rose just 0.1%, reaching a total of 5% during the past 12 months, the slowest annual total in nearly two years, since May 2021. The Producer Price Index (PPI) was down a shocking 0.5% in March, the largest monthly drop in almost three years (April 2020) and it rose just 2.7% in the past 12 months.

But hold on: April might be a different story. On April 1, OPEC+ cut their combined crude oil production by a massive 1.2 million barrels per day and the price of oil shot up $5 per barrel the following Monday. Gold shot up to over $2,000 the same day. In the last month, crude oil prices have risen 17.8%. Sugar is up 20.1% in the last 30 days. The overall CRB (Commodity Research Bureau) Commodity price index is up 9.73% in the last month and the S&P Commodity Index is up over 10%. This means that the April Producer Price Index, released in mid-May, could be sky-high, so it’s a good bet “rising inflation” will be back in the headlines once again.

The next wave of commodity price inflation may come from a new (probably un-Constitutional) ruling by the Biden Administration’s Environmental Protection Administration (EPA), which announced new emission limits that would require up to 67% of new vehicles sold by 2032 to be fully electric. That would require the mining of a huge amount of earth minerals to build those vehicles and their heavy batteries.

This could effectively become a death blow to internal combustion engines, as it is far more onerous than the current regulations covering EPA emissions. These rulings call for huge percentage decreases in auto and truck emissions by 2032, which may force consumers to switch to costly electric vehicles.

The New York Times wrote that these rules would force EVs to comprise 54% to 60% of new vehicles sold in the U.S. by 2030, and 64% to 67% by 2032, but the real problem is that the world only mines 10% of the required lithium to meet these new emission rules, so we can expect sky-high lithium prices (60% of which comes from China), and cobalt (70% coming from the Congo, much of it mined by children in small, hand-dug mines), and copper (mined in Peru and Chile, smelted in China) for the electrical system.

Inflation is coming back strong, thanks to President Biden and his “Green New Deal” zealots.  The Wall Street Journal editorialized that the Biden Administration wants to “Remake the Auto Industry,” transforming it into a “de-facto state-directed utility.” Moving from six-percent total electric vehicles in 2022 to 67% in 2032 would be revolutionary and quite dangerous.

Last week, I talked with Mike Pompeo, the former Director of the CIA and the Secretary of State in the Trump Administration (2017-21). We discussed the threat of Chinese counterfeit products and how a massive reliance on electric cars is a national security risk, not only in cases of long-term power outages in the electric grid, but even in times of “normal” emergencies, such as Gulf region hurricanes. During those evacuations, thousands of cars crowd major highways, bumper-to-bumper, with little chance of electric recharging. At this time, gas stations can help much more in this scenario.

Electric cars are also prohibitively expensive. They remain an option for drivers in urban settings as a second household vehicle. For the time being, the majority of automobiles and long-haul trucks must remain fueled by crude oil, but with far cleaner engines than ever, as America has reduced its carbon footprint rapidly in the past decade.

Look for Gold to Soar During the “Debt Ceiling Debate,” Caused by Massive Over-Spending

In his 2023 State of the Union address, President Joe Biden said, “In the last two years, my administration has cut the deficit by more than $1.7 trillion – the largest deficit reduction in American history.” That’s a textbook case of How to Spin Statistics. While passing massive spending bills, we were speaking here about the recovery of tax revenues after the COVID crisis, but what is his spending increase causing now?

In the first half of the federal government’s Fiscal Year 2023 (October 1, 2022, to March 31, 2023), total federal spending rose by 13%. However, federal revenues decreased 3%, resulting in a $1.1 trillion deficit (a $2.2 trillion annual rate), the worst since COVID 2020-21. The deficit was partly due to the inflationary Cost of Living Allowance (COLA) for Social Security (+10%) plus rising Medicare spending (+14%) but the biggest gain was the 41% increase in the cost of servicing the national debt, due to rate increases.

Within the next two months, Congress must hold a debate on raising the debt ceiling of $31.4 trillion, which we exceeded in January. Since then, the government has continued operating through a variety of special measures, including tax receipts anticipated this April 15, but that can only last so long. If the Democrats do not start being realistic about spending cuts, the Republicans can always play the “shut down card” and let the government default on some payments – the “nuclear” option – but that is unlikely.

The last time the government came to the brink over the debt ceiling was August 2011, when gold soared over $400 (+25%) in just two months, from $1,495 on July 4^th to $1,900+ by Labor Day, 2011. This same kind of gold bull market could happen again this summer if there is a major debt ceiling showdown again. Contact your professional account representative today to find out how you can be ready for this predicted rise in gold.

America must face its debt crisis honestly. As we began this century, the national debt was just $5.75 trillion. Now it is over $31 trillion – growing over 5.5 times in 23 years. Here’s our current debt calendar math:

Federal debt incurred under first 42 Presidents, from 1776 to 2000: $5,751,743,092,605

2001-2008            George Bush added $3,458,844,351,456, to total $9.2 trillion.
2009-2016            Barack Obama added $9,690,345,245,954, doubled debt, to $18.9 trillion.
2017-2020            Donald Trump added $4,271,066,443,813, to $23.2 trillion.
2021-2023            Joe Biden so far added $8,290,930,787,528, to $31.463 trillion (more to come)

Total Debt Incurred Since 2000        - $25,711,186,828,753 in 23 years (over $1 trillion/year)

The government will need to pay for this debt through “monetization,” printing dollars to pay the debt, and that means more inflation. You can’t “print more gold,” so gold will need to rise in dollar terms. Don’t forget to take a moment and call your professional account representative now for guidance on buying gold and silver.

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