History of Hard Money: Japan’s Lost Decade

Throughout the 1980s, Japan’s economy soared past the rest of the world. The growth that once earned the envy of investors and economists now stands as a dire warning against debt, speculation, and easy money.

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Gold is sluggish, consumer prices are not

Alternative measures of inflation from the Cleveland and Atlanta Fed point to underlying pressures that threaten the “transitory” nature of this inflationary episode.

Key Takeaways:

  • U.S. companies have sold a record amount of junk-rated debt this year, which collateralized loan obligations (CLOs) have been scooping up at a record pace. Remind anyone of 2007 and 2008?
  • Bloomberg Intelligence says gold will “revisit its peak soon,” but has several large barriers to overcome beforehand (such as tightening of monetary policy).
  • Consumer prices in Europe are rising at the fastest pace in 13 years, catching up to the United States’ record inflation numbers.
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The Fed: stuck between an inflationary rock and a debt-ridden hard place

The U.S. central bank tries to tame persistent inflation without sacrificing the rampaging and uniquely fragile stock market.

Key Takeaways:

  • Options trading volume has reached the highest level in history, as more and more market participants pile in risk in exchange for outsized returns.
  • Although the CPI registered a lower reading in August than it did in July, inflationary pressures in housing, shipping, and retail show few signs of slowing down.
  • Gold slid down to $1,720/oz this week as the U.S. dollar rallied and bond yields jumped.
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The Debt Limit, the Stock Market, and Gold

The U.S. stock market surges higher as investors refuse to look at alternatives, even as the government risks defaulting on its debt and jeopardizing the U.S. dollar.

Key Takeaways:

  • Gold turned around at $1,834 for the 4th time but has maintained its short-term bullish pattern of higher lows.
  • Physical gold demand is surging in India and China (gold’s two largest consumer markets) after a slow summer, which could boost returns this month.
  • Treasury Secretary Janet Yellen urged Congress to raise the debt limit as soon as possible, or risk irreparable damage to the United States’ credit rating and currency.
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The U.S. dollar losing steam?

Gold needs a catalyst to jump out of the $1,800 zone, and U.S. dollar weakness might be the answer.

Key Takeaways:

  • Gold’s 200-day moving average and 50-day moving average are headed for a “golden cross,” which might be enough to push gold above the $1,837 resistance zone.
  • Goldman Sachs predicts that the U.S. dollar index has very limited upside potential – all the positive news has already been priced in.
  • The United States’ Afghanistan exit has damaged the nation’s reputation, further deteriorating the post-WWII Bretton Woods economic system where the dollar is king.
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Gold looks strong, but struggles to hold gains

Gold has been stuck in a $40 trading range for over a month, building a base around the $1,800 level and looking toward higher highs.

Key Takeaways:

  • Gold has been trading sideways for a month, but external pressures are mounting to push gold back into its long-term bull market.
  • In August 2020, gold began a retracement phase. It looks like that ended in March, but we need a few higher highs to confirm the end of this bearish phase.
  • The government is fighting to either re-suspend or raise the debt ceiling, which is bearish for the U.S. Dollar and bullish for gold.
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Gold Bounces on U.S. Dollar Weakness

Gold took a $35 jump after struggling to escape the $1,800 range, alongside strength in equities and cryptocurrency markets.

Key Takeaways:

  • If gold puts in a higher high on this rally, the price would be on its way regain June losses.
  • The U.S. Dollar Index dropped below its rising channel after the RSI divergence last week, giving gold a boost.
  • Companies are protecting their margins by passing higher costs to consumers. Despite record inflation, consumer demand for goods has also been rising.
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Gold Sets the Stage for its Next Rally

As inflation metrics continue to break records, the U.S. dollar could be reaching a breaking point.

Key Takeaways:

  • Gold has been rising steadily for the past week, recovering from its $100 drop-in June.
  • Existing home prices have increased 24% over the last year and rent is up 9.2% in 2021, yet CPI only reflects a 2.2% increase in housing costs. When will CPI catch up?
  • Premiums on some precious metals products at record highs, reflecting a heavy increase in consumer demand for gold and silver.
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Bullish Indicators Balance the Bad

In both the stock market and the precious metals markets, investors face a paralyzing collection of bearish and bullish evidence. Everyone is looking for the asset that will emerge as the winner in this new era of finance.

Key Takeaways:

  • Gold continues to show some weakness following its recent drop. It looks like it might be headed to retest the March lows, but several indicators are signaling a bullish reversal when or before it gets there.
  • The stock market is as white-hot as the housing market, but some money managers worry equity valuations are in a dangerous position. Stocks look priced to perfection, meaning any shock to the system could trigger a major correction.
  • The next couple of weeks will provide some excellent entry points for gold investors. Precious metals are providing a rare pocket of value in today’s extremely expensive financial ecosystem.
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Gold Marches Higher Amid the CPI’s Shocking Jump

Gold is continuing its short-term bullish pattern as year-over-year consumer inflation reached a shocking 4.2%.

Key Takeaways:

  • Gold is up $30 since last week, showing steady gains off its double bottom in March.
  • Yesterday, the U.S. Bureau of Labor Statistics reported a 4.2% increase in prices year-over-year, surpassing expectations and prompting a 3-day stock market selloff.
  • The U.S. Dollar Index bounced off 90 and remains half a point below last week’s level.

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