Gold & Silver Draw Big Attention as Inflation Runs Hot

As inflation continues to come in hotter than expected, gold and silver markets continue to gain upside momentum, although today’s market action is very wild.

Gold ran up to another new record milestone near $2,400 an ounce in intra-day trading on Thursday. And as of this Friday recording, the monetary metal had busted through that level earlier in the day but has now fallen back sharply and currently comes in at $2,381 during a super volatile day of trading. As of this moment gold is putting in a weekly gain of 1.8%.

Turning to the white metals, silver similarly was looking like it was off to the races earlier today, nearly hitting $30 an ounce before retreating. Despite the big reversal here on Friday it is still up 3.3% since last Friday’s close to bring spot prices to $28.61 per ounce. Platinum is advancing 6.1% to trade at $998. And finally, palladium prices are pushing 4.4% higher this week to command $1,087 per ounce.

On Wednesday, the government’s Consumer Price Index for March came in at an annual rate of 3.5%. The CPI jumped sharply from the 3.2% print in February. It also rose more than the projected 3.4% increase. It was the third straight month in which CPI readings topped economist forecasts.

Last month, Federal Reserve Chairman Powell attempted to redefine what progress toward achieving the central bank’s inflation objective means. Instead of needing to see inflation actually come down toward 2%, Powell declared the Fed would consider it to be good enough if inflation just remains where it’s at.

Jerome Powell: We're not looking for inflation to go all the way down to 2%. That's not what we're looking for. We're not looking for better inflation readings than we've had, we're just looking for more of them.

Powell’s flip-flopping on the Fed’s longstanding 2% inflation target was of course meant to lay the groundwork for rate cuts. Central bankers desperately want to find some rationale for cutting despite inflation remaining elevated.

But now with the CPI accelerating higher, the Fed may have to get even more creative with language to try to justify a pivot toward monetary easing ahead of the 2024 election.

Fed central planners swear up and down that they don’t consider politics when making interest rate decisions. But a top economist for the central bank was recently caught on a hidden camera suggesting that Powell wants to help stop Donald Trump from returning to the White House.

Investigative journalist James O’Keefe released bombshell footage this week featuring Aurel Hizmo. Hizmo has helped write some of Jerome Powell’s speeches – and has also helped push the Powell Fed to embrace Woke politics.

Bandicam.com Report: Aurel Hizmo, Principal Economist at the Federal Reserve, talks about how the Federal Reserve has changed to think about environmental issues, equity issues, and racial equality.

Undercover Reporter: Even though he's Republican on paper, Democrats still love him.

Aurel Hizmo: Yeah, because he's responsive. Under Powell, the Fed has changed to think about equity issues, like racial issues. Think about wealth inequality as part of the mandate, as part of the issues we're following. Think about climate change. So, the feeling is this, we don't want Trump to be in the government.

Bandicam.com Report: Aurel Hizmo, Principal Economist for the Federal Reserve, says Jerome Powell wants to go down in history as someone who "held the line against Donald Trump."

Even though Powell was originally appointed Fed chairman by President Trump, the two had a falling out after Powell began raising interest rates. Powell and other Fed officials fear that Trump would try to shake things up at the central bank if he becomes President again. They have no such worries under a Joe Biden presidency.

Biden himself expressed confidence this week that the Fed would bring down interest rates. It was a not-so subtle reminder to Jerome Powell and company that he is counting on them to help stimulate the economy ahead of his re-election bid.

The Fed may very well be willing to throw whatever inflation-fighting credibility it still has out the window in order to try to give the economy a boost. It may win accolades from the White House and from short-term-oriented traders on Wall Street.

But letting inflation run hot is no gift to long-term investors. It certainly doesn’t help consumers struggling with higher costs of living. And any artificial boost it gives to GDP will be transitory – to borrow a term Jay Powell once used to describe inflation.

The stock market may still be riding high for now, but history shows that stocks can suffer massive bear markets in real terms during periods of high inflation. And in recent weeks, the S&P 500 has actually been losing ground when priced in terms of both gold and silver. Bonds are faring even worse versus sound money.

The risk for holders of financial assets is that whatever nominal positive returns they generate fail to keep pace with rising inflation over time. Although the returns of precious metals markets are not guaranteed, gold and silver have plenty of history on their side to suggest that they will continue to perform an essential role in protecting investors from the ravages of inflation.

Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast.

And remember to tune in as well each Wednesday for the Money Metals Midweek Memo. Mike Maharrey brings you some wonderful commentary every week and I highly encourage you to check that out if you’re not already. Just go to MoneyMetals.com/podcasts or find that on whatever podcast platform you prefer.

Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a wonderful weekend everybody.

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