This Is What Is Really Driving The Price Of Gold Higher
This Is What Is Really Driving The Price Of Gold Higher from King World News
As we come to end of what has been some historic and wild trading in the month of August, this is what is really driving the price of gold higher.
This Is What Is Really Driving Gold Higher
August 31 (King World News) – Jeff Snider at Alhambra Partners: “It isn’t inflation which is driving gold higher, at least not the current levels of inflation. According to the latest update from the Bureau of Economic Analysis, the Federal Reserve’s preferred inflation calculation, the PCE Deflator, continues to significantly undershoot. Monetary policy explicitly calls for that rate to be consistent around 2%, an outcome policymakers keep saying they expect but one that never happens.
For the month of July 2019, the index increased 1.38% year-over-year. That’s only slightly above June’s 1.33% advance. After having achieved the inflation target for all of eight months in 2018, despite an unemployment rate at a half-century low they’ve missed the mark now in each of the nine months following.
The so-called core inflation rate, the deflator stripped of energy and food prices, increased just 1.58% in July. The rate is basically unchanged since January even though it was during this time when the labor market (allegedly) reached its epic level of tightness.
No matter how much Fed officials keep insisting that inflation will (someday) rise toward 2% and stay there, the evidence right now gives them plenty of justification should they wish to change tune. Currently, Jay Powell’s FOMC is sticking with a one-and-done rate cut plan in part to stay consistent with their overarching message of an otherwise strong economy which is experiencing nothing more than transitory cross currents.
Should the economy worsen, as most forward-looking indications suggest, there isn’t any wall of consumer prices to hold officials back from responding – even “forcefully” responding.
This is the new defense line for the bond/dollar bears. Maybe the BOND ROUT!!! is dead in the one sense, though perhaps able to be resurrected by something else. Interest rates in particular will still explode higher, they claim, only this time it won’t be a growth acceleration as they had been saying throughout last year. With growth at least on pause, the only available option left to them is central banks who will have to get creative maybe even crazy.