Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Where’s my self-driving car? - 16th Aug 22
Real Reason why Pakistan and India Gained Independence in 1947 at 75th Anniversary - 16th Aug 22
Electronic Payments Can Benefit Your Business - Here’s How - 16th Aug 22
Qualcom Stock Market Harbinger - 12th Aug 22
Apple Exec Gets World's 1st iPhone 14 for Daughters 14th Birthday Surprise Present Unboxing! - 12th Aug 22
Steps to remember while playing live roulette online - 12th Aug 22
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
WHY PEAK INFLATION RED HERRING - 5th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
SILVER’S BAD BREAK - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”?

Stock-Markets / Inflation May 16, 2021 - 06:41 PM GMT

By: MoneyMetals

Stock-Markets

The Labor Department reported yesterday that the Consumer Price Index jumped 4.2% from the prior year. Although a big rise in the CPI had been expected, the actual number came in even higher than economists had forecast. 

According to the CPI data, inflation in April accelerated at its fastest pace in more than 12 years. Higher prices showed up everything from used cars to lumber to energy to food.

If April’s rate of price increases were to persist for another 11 months, the annual CPI growth rate would be 10.3%. And that wouldn’t even account for items that the CPI excludes or understates.

Jerome Powell and other Federal Reserve officials have repeatedly insisted than any rise in inflation this year will be “transitory.” They cite base effects from last year’s economic lockdown and supply bottlenecks they expect to be temporary.


But investors appear to be concerned that inflation is now becoming a much bigger problem than the Fed acknowledges.

Emergency government benefits pumped into pocketbooks and a record-high budget deficit that shows no signs of narrowing will have lasting effects. The cycle of spending, borrowing, and printing by the trillions looks to be more of a permanent than a transitory practice in Washington.

Stocks, bonds, and even precious metals got hit with selling following the CPI report. However, gold did show relative strength versus the S&P 500, which lost 4% for the week through Wednesday’s close. Gold was down a mere 0.5% over that period.

Gold and silver also succumbed to some modest selling pressure through Wednesday – though they both held up better than the stock market.

Naturally, many precious metals bulls were disappointed that gold and silver didn’t scream higher on the inflation news. The reason they didn’t has a lot to do with interest rates. Bond yields moved up and futures markets began pricing in higher probabilities for a Fed rate hike by the end of the year.

When it becomes clear that central bankers won’t get out in front of inflation with a sufficient number of rate hikes anytime soon, that’s when precious metals markets can be expected to take off. Gold and silver thrive during periods of negative-trending real interest rates – and that includes rate-hiking cycles where the Fed is almost always behind the curve.

Although bullion buying has been strong in 2021, precious metals markets have continued to be overshadowed by the cryptocurrency craze.  Bitcoin and more recently Dogecoin have been all the rage among digital speculators.

Last weekend, billionaire Tesla CEO and cryptocurrency aficionado Elon Musk hosted Saturday Night Live.  During the “Weekend Update” segment, Musk’s character was repeatedly asked to explain what Dogecoin is. He retorted that it’s just as real as the U.S. dollar, which isn’t far from the truth.

SNL Weekend Update Anchor #1: So, what is Dogecoin?

Elon Musk: Yeah, like I said, it's a digital currency.

SNL Weekend Update Anchor #1: Like, okay, for instance, this is a dollar, right? It's real. See?

Elon Musk: Sort of. Sort of real. Yeah.

SNL Weekend Update Anchor #1: So, what is Dogecoin?

Elon Musk: About as real as that dollar.

SNL Weekend Update Anchor #1: Now Colin, are you making any sense of this?

SNL Weekend Update Anchor #2: I've actually been reading a lot about it, yeah. I'm trying to diversify my investment portfolio. My question is what is Dogecoin?

Elon Musk: I'm glad you asked.

SNL Weekend Update Anchor #1: It's a good question.

Elon Musk: Well, it's the future of currency. It's an unstoppable financial vehicle that's going to take over the world.

SNL Weekend Update Anchor #1: I get that, but what is it, man?

Elon Musk: I keep telling you. It's a cryptocurrency you can trade for conventional money.

SNL Weekend Update Anchor #1: Oh, so it's a hustle.

Elon Musk: Yeah, it's a hustle.

Musk has been accused of using his platforms to manipulate crypto markets. Some say he single-handedly caused the recent price explosion in Dogecoin with his constant tweeting about it. But after confessing on SNL that it’s a “hustle,” the cryptocurrency promptly sold off.

Dogecoin began as a joke based on an internet meme and it may well have peaked as a result of jokes made by Elon Musk.

Bitcoin is regarded as a more serious cryptocurrency by way of gaining wider acceptance by the public and businesses.

But Musk shocked Bitcoin enthusiasts on Wednesday when he announced that Tesla would no longer accept the cryptocurrency as payment. He cited Bitcoin’s hefty energy use as being environmentally unfriendly.

Bitcoin prices plunged as much as 17% on the news.

Pressure from social activists and government regulators who have long opposed cryptocurrency could force other major corporations and financial institutions to blacklist Bitcoin.

All this goes to show that despite their massive run-ups to market capitalizations that rival top blue-chip stocks, cryptocurrencies remain fragile. They rest entirely on confidence that can erode in an instant.

By contrast, precious metals don’t derive their value from any celebrity’s comments and don’t depend on the approval of big corporations.

Gold and silver are valuable based on their history, their aesthetic properties, their scarcity, and their utility. These fundamentals will never go away regardless of where precious metals ultimately fit in the universe of alternative currencies.

By Mike Gleason

MoneyMetals.com

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2021 Mike Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in