Inflation Comes Down, but Gold Surges – What’s Going On?

Via Birch Gold Group

Inflation Comes Down, but Gold Surges. What Is Going On?

From Peter Reagan

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Reviewing gold’s big week, the folly of Canada’s central bank, and a portfolio manager’s outlook on what lies ahead.

Gold’s sudden surge over $1,750

Gold’s $100+ rise to $1,760 from $1,650 last week wasn’t an intraday price move, but it feels so abrupt and rapid. And every time gold’s price surges like this, we expect there to be some crisis or calamity. After all, it was gold’s biggest weekly gain in 30 months.

Remember what happened 30 months ago?

This time, though, there’s just no obvious crisis or calamity on the horizon… Should we consider this a newly-bullish development? That gold can gain so much (and so quickly) in the total absence of alarm bells?

So what’s happening?

The latest U.S. inflation data clocked in at 7.7% , which is, as the Bureau of Labor Statistics (BLS) wants you to know, “the smallest 12-month increase since the period ending January 2022.” So far this year, inflation has declined from over 4x the Fed’s target to almost 4x the Fed’s target. I guess you can call it progress…

Depending on where you live, inflation remains alarmingly high, over 12% in some regions while other areas celebrate a pullback to merely 6.6%. That matters, because high inflation (and high inflation expectations) have often fueled gold demand.

Mainstream media are full of stories about, “Why is gold posting massive gains on news of slowing inflation?”

There are two ways to look at this…

The first? Inflation is still orders of magnitude too high, and not declining appreciably. (Should CPI continue to come in 0.2% lower every month, we’re still looking at over two and a half years of prices rising faster than the Fed’s targeted rate.) Folks are finally catching on, and not just retail investors – as we discussed last week, central banks are buying gold at a 55-year record pace. Maybe even the slowest learners are starting to understand that their dollars are going to keep losing value faster than expected for significantly longer than anyone has been willing to admit?

The second? Well, any drop in headline inflation gets Wall Street hoping for some kind of Federal Reserve policy turnaround. The much-discussed “Fed pivot.” Perhaps we’ll see stimulus, another few trillion dollars of money-printing and another round of quantitative easing to ease our pain? That’s what we’ve come to expect, given that food and energy prices have yet to decline.

That’s right – I said, food and energy prices have yet to decline. But inflation went down? How does that make sense?

Well, according to the BLS, exactly four price categories declined in October:

October 2022 CPI update via Bureau of Labor Statistics

Chart and data via U.S. Bureau of Labor Statistics

That’s right: we’re paying less for piped gas, used cars, clothing and medical care services.

In other words, all this hoopla about Inflation’s finally declining! is rather misguided. (Unless you’re shopping for a new wardrobe or an old sedan.)

But the real story is much simpler: gold price rises in direct correlation with a weakening dollar. See for yourself:

30-day chart of gold price vs. dollar strength

When the green line (USD) goes down, the gold line goes up. Source

This is just a 30-day chart, but it gives you an idea of just how silly it is to talk about gold price without also considering the U.S. dollar’s purchasing power.

In the long run, I expect the purchasing power of the dollar to continue to decline, and gold’s price in dollars to rise. In the short run, we’ll continue to see big price swings whenever Wall Street decides they can forecast the future.

Canada might be the only nation you’ve heard of that’s “too smart” to own gold

Numismatists might argue, but the Canadian maple leaf is probably the main competitor of the American eagle. The Royal Canadian Mint doesn’t exactly try to hide this desire. And since the U.S. has the largest central bank bullion stockpile on record by a wide margin, Canada can’t be trailing too far behind… Right?

Always the forward thinker, these days Canada finds itself as close to the only nation without gold reserves. The Bank of Canada (BoC) sold its bullion hoard in the early 2000s at bargain prices, surprising everyone who understands sound money.

The official reason, according to former BoC governor David Dodge, had to do with storage costs and bond yields. Dodge elaborated on this back in May, when it was quite clear that any storage costs of holding gold are negligible compared to the risks associated with investing in government bonds (whose market is already years into a crisis). Along with the bond market going under, gold’s price has climbed sixfold during that timeframe.

It’s a good thing for central bankers they get their paychecks regardless of their investment performance.

A more unofficial reason for this shocking about-face, presented by analyst Martin Murenbeeld, is that Canada has no issue viewing itself as a satellite to the U.S. Or, more accurately, it had none back then. The BoC has a swap agreement with the Federal Reserve, meaning that it can just ask the Federal Reserve for liquidity if it’s needed.

We assume no sound money Canadian is happy with this answer, and less so in recent times. These days, nations around the world are making it clear that hoarding gold bullion is the thing to do, and not just because it’s such a safe haven. Serious doubts have been placed on whether the Federal Reserve actually has access to its own gold, or did it lease the bullion out (to save money on storage costs?)

Murenbeeld finds it a likely scenario that the U.S. might need to provide some gold backing to the U.S. dollar down the line to keep it afloat. It’s certainly a gold bug’s best-case scenario. But even if this doesn’t happen, it feels unlikelier that a country would want to part with its gold with each passing day. As BRICS collude to form a gold-backed alternative to the dollar, one that was made possible by dedicated gold hoarding, Canada might find itself regretting its decision even more.

Stocks to fall 30-60% (unless the Fed pivots)

Michael Pento, a seasoned portfolio manager, spoke to Wealthion about the state of the markets and how the Federal Reserve continues to dictate it. The best case scenario? The Fed turns course right now, but we still experience some degree of a recession because the wheels are already turning. If that’s the best case scenario, and certainly given how unlikely it is, we’re curious to hear what the less-palatable ones are.

Pento says stocks, which are often mentioned as gold’s biggest competitor, have to fall by another 30%-60% unless there is a true policy shift. As Pento explains, the stock market’s problems can only be abated either by lower inflation or a re-introduction of quantitative easing. The issue is that one doesn’t go with the other: quantitative tightening is the only way the Fed knows how to bring inflation down, and it appears to be sticking to it.

According to Fed Chair Jerome Powell’s statements, along with a massive reduction in its balance sheet, the central bank wants to reach and then stick to a static interest rate of 5%. It’s a pretty far cry from the 13% of the 1970s, but it’s still something. If that happens, Pento feels that the still-overvalued stocks have to implode and bring general economic conditions down with them.

Pento doesn’t expect any kind of significant Fed policy turnaround until H2 2023, though he says hawkish rhetoric could persist much longer. When the turnaround does happen, it will come in the aftermath of a downturn that will affect all assets. One does imagine gold will be left out of this havoc, to say the least. Pento and the host get into several other things of note, including:

  • Whether inflation is something that can truly be dealt with
  • Excessive reliance on Fed credit on behalf of the already insolvent banks
  • .. is deflation something we are ever likely to see?

It’s a thought-provoking interview, and I strongly recommend watching the whole thing.

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

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This first part was written in 2019.

ROOSEVELT’S GOLD

“Well, suppose they confiscate my gold just like Roosevelt did 75 years ago?” If I have heard that once, I must have heard it a hundred times. Did Roosevelt confiscate everyone’s gold back in 1933? If he did, how come there’s still a lot of it for sale in a thousand coin shops and numismatic dealers?

Let’s start at the beginning and see what really did happen. The first thing we must remember, is that America was in the midst of a severe depression, caused by loose money issued by the Federal Reserve, which they still are doing. There was such an enormous amount of “liquidity” floating around, as today, that everyone was buying stocks on margin of over 90% at times, which is not happening today. The stock market was on everyone’s lips and minds. Bootblacks and janitors were buying stocks. Stocks would supposedly go up forever, and there was no risk.

Ha Ha.

The market crumbled and crashed, leaving everyone out on the well known limb, owing for stocks which often times weren’t worth not much more than the paper on which they were printed. The result was that in fairly quick order, over 25% of the American work force was on the street selling apples, on the dole, or in bad shape in one way or another. Times were tough, to make it sound kind!

Roosevelt wanted to pull America out of the depression. He thought up all sorts of make-work schemes, and anything to put people to work. But he didn’t have any money. Remember, unlike now, the dollar was:

BACKED BY GOLD.

He therefore needed all the gold he could get, so he could print more dollars to spend in placing more people in those make-work jobs. Everyone knew that gold and dollars were synonymous. Americans were carrying gold coins in their pockets just like they were money, which they were. Small, dime size gold coins were a dollar, and there were $5, $10 (Eagles) and $20 (double Eagles) coins in general circulation everywhere. Gold was money, dollars were money, and the two were the same. How could FDR get gold, so he could print more dollars to spend, to get us out of the depression?

He also had the farmers on his neck. They wanted higher prices for their crops, and there wasn’t any money around to give to them. On March 9th, 1933, FDR declared a “Bank Holiday,” with all the banks closed. Bank “runs” had posed another problem for the “New Deal,” as Roosevelt called:

His massive move towards abject socialism!

People were closing their savings accounts and bouncing checks by the millions, just to survive in some cases.

Today, we have millions of credit cards maxed out for the same reason.

There was no FDIC then, so no savings account was insured. (Today, the FDIC has less than a nickel in its accounts for every $100 worth of insurance). Banks had made huge margin loans on now worthless stocks, and they had no money to pay for savings account closures. FDR allowed they could close for a ‘holiday,” so they could get their troops in order. Many didn’t, and never re-opened again. My Parents lost money in a bank which never re-opened.

Banks were in deep trouble. People were demanding their money, and the banks didn’t have any. There was no FDIC, and dollars were backed by gold. The treasury had to have gold to print more dollars to make everyone happy, banks whole, and to fund make-work projects. What to do? Get some gold! How? The mines were producing all they could, but more was needed. More dollars were needed for stuff that didn’t help get us out of the depression at all. Nothing Roosevelt did, got us out of the depression, or even help a bit.

As a final effort, he outraged the Japanese enough that they bombed Pearl Harbor, and we were at war. The depression was over.

Roosevelt had the brilliant idea that he would order everyone to turn in their gold in exchange for paper dollars, which were backed by gold. On April 5, 1933, Roosevelt issued Executive Order # 6012, which ordered Americans to surrender their gold to the government by May 1st, 1933. Violations were to be subjected to a $1,000 fine and as much as ten years in prison. First of all, an Executive Order is not in the Constitution, and an Executive Order could never levy a $1,000 fine or ten years in the slammer! But Americans were broke, miserable, and that $20 gold piece they had squirreled away would buy a lot of food, with bread at less than a dime a loaf.

Those who couldn’t afford to hold their gold, turned theirs in and received brand new paper dollars for their gold.

The gold allowed more dollars to be printed, which were foolishly used for nutty things, and none were of help in fighting the depression. A couple of days later, on May 7th, FDR had one of his “Fireside Chats” over radio, to soothe the American outrage. He said that if Americans continued to ‘hoard’ gold, there wouldn’t be any left, and therefore in the interest of fairness, government should own all of it, and use it wisely.

Ever hear of such claptrap?

Gold markets have existed for thousands of years, and gold has endlessly changed hands around the world! Smugglers and black markets in gold have flourished in times of war, peace, or dictatorships. FDR also persuaded Congress to wipe out the gold clause in existing contracts, which specified payments to be made in gold. In a Joint Resolution of June 5, 1933, all gold payments in existing contracts were made null and void. Even Congress, stupidly went along.

On January 31, 1934, Roosevelt signed into law the “Gold Reserve Act,” which set the gold price at $35 per ounce, as opposed to the former $20.67

In other words, he had stolen hundreds of millions of dollars from Americans by raising the price of gold by about 70%!

What in reality he had done, was to lower the value of the dollar by 70%, in relation to gold.

It is estimated that Roosevelt hauled in $7 billion worth of gold from submissive Americans, and still the depression kept right on going.. My Dad was a corner druggist in Washington D.C. for 36 years, and I grew up in that drug store.

I’ll always remember those days as being educational, and lots of fun. I can still hear my Dad calling Eleanor Roosevelt “Old Horseface,” and bellowing about Roosevelt, calling him every name in the book. He hated the Roosevelts, as did all businessmen, and anyone with a farthing of sense.

Did Roosevelt’s Executive Order # 6012 “seize” everyone’s gold? No! How could anyone know who had it? Gold coins have no serial numbers, and practically everyone had them. Could government seize socket wrench sets if it passed a law saying that everyone had to turn theirs in? Could government ever know how many people had bought socket wrenches from hardware stores, auto supply stores, Sears Roebuck, Montgomery Ward, et al? Socket wrenches have no serial numbers, and they certainly don’t have to be ‘registered’ when you buy a set. Both have uses, and both may be about the same size I suppose.

Those who didn’t need the dollars, undoubtedly said to themselves, “Me? Give you my gold? “Hell no!” Those who were living at the edge of starvation, having lost their jobs, having lost their savings in closed banks, and seen their stocks go to virtual zero, naturally gave their gold to the government in exchange for bread money.

No one was ever fined, and no one ever went to jail for an Executive Order which could never have been enforced.

There are actual laws against prostitution and drugs, but they flourish on a daily basis. Hookers and drugs have no serial numbers either, and aren’t registered like car titles, real estate deeds or stocks.

How could government “seize” your gold, when no one knows you have it? Registered guns have possibilities for seizure, because of their registration, but when they come to get yours, as I am certain they will, you “had it stolen,” “sold it at a yard sale,” or “gave it away,” hopefully. No gold coin is “registered,” and no gold coin has serial numbers other than the Credit Suisse 1 oz gold bars. A decade ago, in Silverton, Colorado, a miner was accused of stealing gold from a mine, after lots of it was found under his bed. It went to court, and Henry Kolego’s lawyer asked the prosecution if the supposed stolen gold looked different if it came from one mine or another? “No.’ Does the supposedly stolen gold have serial numbers for identification? “NO.” Henry K. went free. Did he steal it? Probably, but it was totally un-provable.

Can anyone from the government, seize your gold like Roosevelt did? How could they? Gold is not radio-active, so a Geiger Counter wouldn’t work. “Well, they’ll check your supplier or seize your records.” If you had gold at one time, how could anyone prove you still had it if you had given it away, sold it, or had it stolen? Like registered guns, if you please. The thought of government going through a million court cases, violating the Fourth Amendment, trying to “seize” your hoard of Krugerrands, borders on the insane and, at least is laughable. As a refresher, the Fourth Amendment says in part, “The right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures shall not be violated.” Is it illegal for you to purchase gold or silver? No. Is it illegal for you to own them? No. Ever hear of the legal term “ex post facto law?” Just forget the “seizure” nonsense, and protect yourself”.

https://www.coloradogold.com/2019/08/26/roosevelts-gold-2/

I agree with all of the above except Roosevelt’s motives in this massive THEFT…he was owned by the same Puppet Masters who own Biden…THE GREAT DEPRESSION was a TACTIC…it is just that then during that TIME the strings were far, far less visable…and most of the audence was far, far, less knowledgable and far, far less jaded.

You cannot judge people in their time…for what we know in our’s….that most of them did not know in theirs!

REMEMBER THAT.

The FED Puppet Masters did not want to end the Depression…it was a path to WW2.

But…I dirgress…

Here is MOUR:

On April 5, 1933, the president signed Executive Order 6102. It was touted as a measure to stop gold hoarding, but it was in reality, a massive gold confiscation scheme. The order required private citizens, partnerships, associations and corporations to turn in all but small amounts of gold to the Federal Reserve in exchange for $20.67 per ounce.

The executive order was one of several steps Roosevelt took toward ending the gold standard in the US.

With the dollar tied to gold, the Federal Reserve found it difficult to increase the money supply during the Great Depression. It couldn’t simply fire up the printing press as it can today. The Federal Reserve Act required all notes have 40% gold backing. But the Fed was low on gold and up against the limit. By STEALING GOLD FROM THE GULLIBAL PUBLIC the Fed was able to boost its gold holdings.

EO 6102 followed on the heels of an order Roosevelt issued just weeks before prohibiting banks from paying out or exporting gold. Just two months after the enactment of EO 6102, the US effectively went off the gold standard when Congress enacted a joint resolution erasing the right of creditors to demand payment in gold. Then, in 1934, the government’s fixed price for gold was increased to $35 per ounce. This effectively increased the value of gold on the Federal Reserve’s balance sheet by 69%. By increasing its gold stores through the confiscation of private gold holdings, and declaring a higher exchange rate, the Fed could circulate more notes. In effect, the hoarding of gold by the government allowed it to inflate the money supply.

President Richard Nixon put the final nail in the coffin when he slammed the “gold window” shut in 1971, severing the last ties the dollar had to gold. Nixon uncoupled gold from its fixed $35 price and suspended the convertibility of dollars into gold by foreign governments and central banks.

Today, the Fed doesn’t have to worry about backing its notes with gold. It can increase the money supply with no restraints at all, thanks to the efforts of Roosevelt and Nixon. THE UNI PARTY.

When he announced the closing of the gold window, Nixon said, “Let me lay to rest the bugaboo of what is called devaluation,” and promised, “Your dollar will be worth just as much as it is today.”

This was a lie.

Let me close with this as TSHTF is thundering at us:

1. Water

2. Food/Food Production

3. Shelter

4. Essentials

5. Guns/Ammo – Training – Defense/Offense Capabilities

6. Medical

7. Cash (Fiat Dollars) in your hands not a Bank (enough for as long as you can build up a surplus for.)

8. Barter

9. Community/Tribe

10. Communication

11. Plan B & C

12. Silver (pre 64 junk dimes, quarters, & 1 oz. American Eagles…this is what most can afford and should buy as far as PM’s.)

13. Gold (only if you have WEALTH, buy it in all values from 1/10 of an ounce to 1 oz.)

Both 12 & 13 must be in your hands…

Yea, 12 and 13 may not be needed at first, but nothing lasts forever, including every single crash in history (but this is an intentional collapse not a crash…so there is that) if you don’t have real wealth, and have not completed 1 through 11 in depth…you do not need to spend what you don’t have (wealth) on gold, but that is another thread.

Precious metals are not either or they are part of complete Prep…until/after the top 11 are secured…no matter who you are.

If you do not have any spare fiat…soon to be worthless…focus on 1 through 11…Uncommon Common Sense.

As far as any 3rd party holding any of your hard assets…that is represented in the ‘Default Risk’ category that will soon drown most Americans in their ignorant financial Rip Tide…that is rising like a tsunami…while most rush to the shore to see why the tide is pulling out…‘Oh say can you see’?

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ramAustralia

A bit long but a good introduction to gold and silver to those you have not thought about it or studied monetary history. I would also like to point out now “paper gold” and “paper silver” prices are well below actual physical gold and physical silver prices. This spread is likely to increase as both gold and silver industrial uses are increasing.

The semiconductor chips in the electronic device you are reading this on are all connected to the rest of the circuitry via GOLD wires/connectors. Modern robotics and mobile device communications devices and infrastructure are all critically dependent upon SILVER. Although any individual device probably doesn’t contain very much gold or silver the number of devices being manufactured is increasing exponentially. Mobile phone tower electronics and certain industrial controllers, however, each can contain quite a bit, which explains why “scrap metal thieves” have been targeting them.

Anonymous
Anonymous

Can’t a person demand delivery of paper silver/gold holdings?

mark
mark

Caveat emptor.

There is a massive international game of Precious Metals Musical Chairs coming…I believe sooner rather than later.

All of the paper PM holders will end up sitting on the floor.

Two words: Hard Assets

Location: In your hands.

Machinist
Machinist

From the COMEX, no. All settlements are considered complete when they are settled in cash. You cannot enforce a demand.

The Central Scrutinizer
The Central Scrutinizer

Demand in one hand. Shit in the other. See which hand fills up first.

Machinist
Machinist

A county I spent quite some time in, was “graced” with FRD’s WPA to build outhouses. Of course, that was a bit before I was around. Later, by the ’70’s there was an effort to be rid of the outhouses, so the county outlawed them. Money to build, money to destroy.

Larry
Larry

“12. Silver (pre 64 junk dimes, quarters, & 1 oz. American Eagles…this is what most can afford and should buy as far as PM’s.)”

Premium on ASE (American Silver Eagle) vs. generic silver rounds makes their purchase unwise. How to buy one troy ounce silver: 1 ASE = $38; 1 round = $28. Buy generic silver rounds of course. Why pay $11 premium over generic for 1 ounce of silver?

“Most” should NOT “afford” to buy American Silver Eagle as they’re overpriced. Talk to and deal with a LOCAL Precious Metals dealer you TRUST.

Harrington Richardson
Harrington Richardson

The USD dropped about the amount Gold went up. As a rule of thumb, USD up Gold down. USD down, Gold up. If USD drops into the low to mid 90’s, you will likely see $2,000 Gold.

Dan
Dan

Currently China is buying gold. That drives demand up and thus prices up. It’s happened before, it will happen again. The insiders in the market manipulate that market to drive prices up and down as they want. It’s happened before, it will happen again. As for ‘Could the government seize your gold’ question. Yes…they could. It wouldn’t be easy, they wouldn’t get a lot of it and it wouldn’t be Constitutional. But that wouldn’t stop them if they chose to do so. Just like they could seize your guns. It wouldn’t be easy, they wouldn’t get them all and it wouldn’t be Constitutional. Again…..that wouldn’t stop them from trying if they chose to do so. Metals are the only TRUE money. They can’t be created out of thin air and thus they are not easy for those in power to manipulate. That’s why we went off the gold standard. To allow for the manipulation of the currency. But fiat currency ALWAYS eventually returns to it’s inherent value….of zero. So if at all possible buy and hold gold/silver and other metals…..like lead and brass.

m
m

Pretty bullshitty making-a-mountain-out-of-a-molehill article.

The always artificial looking push/suppression of gold all the way to less than $1700 -in a very unstable time- is now slowly coming to an end.
Maybe because the USD stopped “strengthening”, who knows.

End of story.

card802
card802

These people can claim inflation is down because housing and used car costs are down, but most people shopping for groceries and clothing don’t see it that way.

Remember prior to the 2008 meltdown when Uncle Warren said derivatives and credit default swaps were weapons of mass destruction?
At that time the nominal value of derivatives was $235 trillion or so and….. boom. Bailout city to prop up the banks and provide bonuses to the very people who took advantage of the Glass Steagall repeal. AIG, we were told got $80 billion alone, we know they probably got more.

Today depending on whose accounting you want to believe, derivatives nominal value is $600 trillion, or maybe it’s $2 quadrillion. Either way, there is no way out of the next boom, and the next boom will no doubt happen on a weekend followed by an extended bank holiday followed by the same thing that happened to the FTX believers.
Zero in your accounts and winter is coming.

The Central Scrutinizer
The Central Scrutinizer

What’s going on?!? Are you shitting me?!

The same thing that’s been going on for as long as I’ve been old enough to read a financial report…

MARKET MANIPULATION

Don’t believe me? Look at the fucking DATA.

Ned Flanders
Ned Flanders

The government will step in and dump a lot of fake EFTs on the market to drop the price.

WilliamtheResolute
WilliamtheResolute

First, if you don’t hold it, you don’t own it…derivative paper gold is no better than fiat. Secondly, people own gold when they lose trust in government and the banks. Third, you would have to be a moron to not see what’s coming…Martin Armstrong has explained The Fourth Turning madness that is about to engulf the world. Hold gold, guns and pray.

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