June 2024 - Week 3 Edition

We Won Another Numismatic Literary Award – For This Newsletter!

Another reason why it pays for customers to deal with our companies is they receive our free award-winning Metals Market Report each month. It also appears on the homepage of our website. This report has won numerous awards over the years and most-recently was awarded first place at the 2024 Press Club of Southeast Texas Awards Banquet for our newsletter titled, “Gold Rising and Poised for More Gains,” based on our October 2023 collaborative meeting with Steve Forbes. We both called for $2,400 to $2,500 gold in 2024, “and even higher if the ‘wrong guys’ win the election,” a prediction made when gold was $1,960 an ounce.

“Thank you,” to the Press Club of Southeast Texas and thank you to Steve Forbes for the insight. I also want to give a special thanks to all our staff and our clients for making this newsletter and our ongoing success possible.

Gold Recovers After Speculators Fall for Inaccurate Jobs Data

Gold is Recovering from the “unfair” bashing it took after the inaccurate “positive” jobs report released on Friday, June 7, which we covered last week. Gold fell $100 at one point that day but it slowly recovered after some of the many negatives in those job totals were released. Gold is now up $60 (+2.6%) from its recent low on June 7. Silver was slower to recover but it is now up $0.50 (+1.7%) from its June 7^th low.

The Fed’s Long-Term Inflation (since 1913) and Government Growth since FDR (1933) Have Caused Long-Term Growth in Gold Prices

Since the Fed was founded in 1913, the U.S. dollar is down 97% to inflation (as measured by the Consumer Price Index) and the dollar is down over 99% to gold (which rose from $20.67 to over $2,300 per ounce).

Most of that erosion for the dollar and the growth in gold prices came after the New Deal of President Franklin D. Roosevelt when he outlawed the private ownership of most forms of gold in May 1933 and then revalued government gold to $35 in January 1934. In the 90 years since the birth of FDR’s New Deal in 1933, total federal spending rose from just over $5 billion to $6.5 trillion in 2023 – a 1,300-fold growth in government spending, according to calculations by Joseph Bessette, Professor Emeritus of Government and Ethics at Claremont Colleges. Adjusted for inflation, total spending is now 77 times higher than in 1933 and domestic spending is 125 times higher, while the population grew just 2.5 times, so real per capita spending grew 30-fold overall or 50-fold in social spending. Bessette said, “No political development in the U.S. in the 20^th century rivals in importance the growth of the massive social welfare state.”

Nearly all market indicators point to the reasons why you should buy gold now. I encourage you to reach out to one of our professional account representatives today so they can quickly and easily help you invest in gold, silver, rare coins or a precious metals-backed IRA.

Is Inflation Really Down – Or Just Not Reported Very Well?

This past Wednesday, the U.S. Department of Labor announced the Consumer Price Index (CPI) was unchanged in May and the Producer Price Index (PPI) did even better, declining 0.2%. In the past 12 months, the PPI has risen 2.2%, with the core PPI rising 2.3%, so the PPI is close to the Fed’s target.

Is this really the case? For the wealthy, prices are rising fast but they don’t seem to care. Steve Forbes reported in his latest restaurant reviews in Forbes Magazine that one popular steakhouse in Manhattan (Beefbar) is charging $255 for a 20-ounce bone-in ribeye, or $495 for a 40-ounce porterhouse. In Sunday’s “Tony” awards, the Sondheim musical “Merrily We Roll Along” won Best Musical Revival and Best Performances by both lead actors, Daniel Radcliff and Jonathan Groff, so I looked up the ticket prices, and the cheapest tickets available this week started at $844 each. Using those numbers, I figure steaks for two at Beefbar and two tickets to “Merrily” would set me and my wife back about $2,500 plus hotel and airfare. I’ll pass.

But I’m more concerned about younger folks like my children and their friends looking to buy a house or living paycheck to paycheck. For them, inflation is horrendous. Mortgage rates haven’t retreated, even after 10-year bonds fell in yields last week – after the “tame” inflation reports came out. Credit card debt and car loan rates are both sky-high. Auto insurance is up 26% in the past year and +51% in three years. Insurance companies blame it on more costly parts, more expensive EVs and far more uninsured drivers on the road these days. Homeownership insurance is up 30% in three years, as are many property tax valuations.

The rising costs of servicing debts are huge, as reflected in a recent paper written by a leading Democrat economist, who claims inflation really peaked at 18%, not the 9% reported. However, the cost of servicing debt is not reflected in any cost of living or inflation index. Neither are higher taxes when inflation pushes you into a higher tax bracket. Food and energy prices are not counted in “core” inflation rates or in the Fed’s favorite inflate indicator (the “core PCE index”) but those costs impact poor families the most.

It’s hard to blame the Federal Reserve alone because it’s really the fault of a spendthrift Congress. How can the Fed fight inflation when it is obligated to provide all the new money Congress demands for its spending programs? Some former Fed chairmen, like Paul Volcker and Alan Greenspan, once tried to convince Congress they must control their spending. Most of the recent Fed chairs, including the current chair, Jerome Powell, have instead urged Congress to stimulate the economy, as was done during COVID, even after the economy revived very quickly following the initial lockdown. As a result, we now see $2 trillion per year federal deficits under Biden, in times of peace and prosperity, which is unprecedented in American history. 

M2 Money supply has grown five-fold from 2000 (at $4.6 trillion) to 2024 ($23 trillion), with the largest surge ($6 trillion) coming during the COVID in 2020-21, most of it unnecessary and excessive. At the same time, the supply of new gold has grown very slowly, resulting in gold’s 700% rise since 2000.

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