Gold Is Rallying Again, But Silver Could Get REALLY Interesting / Commodities / Gold & Silver 2024
Another week, another record high for gold.
On Wednesday, the monetary metal surged above $2,300 per ounce. Ittook a bit of a breather Thursday ahead of today’s key employment report but itrallied again on Friday.
Turning to silver, it made a significantbreakout of its own this week. The white metal shot upabove the $27 level to a fresh 2-year high and rallied to over $27.50 on Friday
As gold prices continue to reachnew heights, bulls are eying even higher highs. Detractors, meanwhile, are pushing thenarrative that gold has gotten too expensive.
They could both turn out to be right, though for different reasons.
In terms of depreciating U.S. fiat dollars, there can be little doubtthat gold prices will continue to gain over time. The official inflation ratemay rise or fall from here, but inflation itself is here to stay.
Those in the deflation camp have for years, and in some cases decades,been calling for gold and most other assets to suffer massive pricecollapses. At this point, thedeflationists have been totally discredited. But a few still stubbornly persistin their belief that a deflationary depression is coming.
For some reason, they just don’t get that inflation is built into themachinery of our monetary system. It’s not the 1930s anymore. Back then,politicians and central bankers were still constrained by the remnants of agold standard. The U.S. Treasury still minted coins made of silver. The FederalReserve had no access to a digital printing press.
Today’s Fed can create unbacked currency in unlimited quantities with the clickof a few keystrokes on a computer. Moreover, today’s Fed has vowed that it willnot tolerate deflation for any sustained period of time. Fed officials won’t even tolerate a positiveinflation rate that they arbitrarily deem to be too low.
Gold’s surge to new records reflects the Fed’s ongoing campaign ofcurrency debasement. Yet the gold naysayers may have a point about the preciousmetal being too pricey – not in terms of dollars, but in terms of other hardassets.
In recent years, gold has outperformed silver,platinum, palladium, and copper. In fact, despite rallying of late, all ofthose other non-gold metals still have a long way to go in order to post newall-time highs.
Metals analysts have noted that structural supply deficits exist inthese markets, perhaps most glaringly so in silver. It may only be a matter oftime before chronic supply and demand imbalances trigger some sort of reckoningin the price-setting mechanism on futures exchanges.
Given that silver in particular is a small market that attracts somehighly leveraged players, a price squeeze could result in some major fireworksto the upside. Silver is certainly gathering some upside momentum, but thetiming of when it might accelerate toward new highs may depend on how the Fed’sshifting stance toward inflation plays out.
Fed Chairman Jerome Powell seemed to confirm last month that central bankers are giving up on trying toget inflation down to their arbitrary 2% target. Powell indicated rate cutswould come later this year even if inflation stays elevated at current levels.
But this week, Federal Reserve Bank ofMinneapolis President Neel Kashkari suggested that persistently high inflation may require policymakers to cancelrate cuts – and even consider rate hikes.
NeelKashkari: Ultimately, we've beensurprised in a good way that the economy has been very resilient, even thoughwe've raised interest rates a lot. So, if we continue to see strong job growth,if we continue to see strong consumer spending and strong GDP growth, then thatraises a question in my mind, well, why would we cut rates? Maybe the dynamicsthat we have right now are actually sustainable.
Interviewer: Here's another question. Are rate hikesoff the table?
NeelKashkari: No, they're certainly notoff the table. I don't know of anybody who's taken them officially off thetable. I don't think they're very likely. Even me, I think I'm on the morehawkish side of the committee. Even for me, I don't think it's likely. I thinkif we continue to be surprised that inflation is more persistent. The firstthing I think we would do is just hold rates here for an extended period oftime to see if that ultimately does the trick. But ultimately, if we getconvinced that that's not enough to bring inflation back down to our target ina reasonable period of time, that I think we would consider raising interestrates from here.
Kashkari is admittedly more hawkish on inflation than most of hiscentral planning colleagues. He may be playing a sort of “good cop, bad cop”routine with markets to try to discourage exuberant investors from aggressivelyfront-running the Fed’s likely rate cut.
In any event, central bankers have no actual intention of eliminatingthe inflation problem. They will never raise rates high enough or constrict themoney supply tightly enough to deliver true price stability.
Given the inevitability of further currency depreciation, gold isn’tdone going up in terms of fiat Federal Reserve notes. And themoves in other metals may just be getting started.
By Mike Gleason
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.
© 2024 Mike Gleason - All Rights Reserved
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