(Money Metals News Service) In this episode of the Money Metals Midweek Memo, host Mike Maharrey discusses the recent dynamics in the precious metals markets, particularly focusing on the Federal Reserve’s influence and the price movements of gold.
The episode starts with Maharrey expressing his skepticism towards the Federal Reserve, suggesting that their actions and statements significantly impact the financial markets, often overshadowing fundamental economic indicators. He points out a recent dip in the price of gold and the Dow, attributing it to comments made by Fed Governor Chris Waller, who was perceived as hawkish in his speech at The Brookings Institution. Waller’s cautious stance on rate hikes led to market panic, reflecting the market’s sensitivity to the Federal Reserve’s monetary policy.
Maharrey then delves into the intricacies of the market’s reaction to the Federal Reserve’s policies. He argues that the market is overly dependent on the Fed’s actions, particularly regarding interest rate decisions. He highlights that the current market is not driven by fundamentals like company value, supply and demand, or the general state of the economy. Instead, it is largely influenced by expectations about the Fed’s monetary policy.
The discussion includes an analysis of December’s Consumer Price Index (CPI) data, suggesting that price inflation is still high and far from the Fed’s 2% target. Maharrey notes that, despite appearances, monetary conditions are not as tight as they seem, especially when compared to historical standards. He cites the 1970s, when interest rates were much higher, to argue that current rates are not sufficient to control inflation.
Jim Grant’s interview is referenced, where Grant describes inflation as “endemic” and suggests that the economy is heavily reliant on easy money. Maharrey agrees, predicting that despite current hawkish tones, the Fed is likely to cut interest rates in the near future, regardless of whether inflation is under control. He believes this will be due to a potential crisis caused by high interest rates impacting the debt-ridden economy.
The podcast concludes with a call to action, advising listeners to consider adding gold and silver to their portfolios as a secure asset in uncertain economic times. Maharrey emphasizes the importance of being prepared for potential economic downturns and highlights the need to stay informed about financial news and trends.