July 2024 - Week 4 Edition

Gold (and Crude Oil) Dip on the “Trump Bump”

As Steve Forbes and I predicted nine months ago, and have said ever since, gold will likely reach $2,500 or more this year “and even higher if the wrong guys win in November,” so after the strong Republican National Convention and Trump’s rise in the polls, followed by the resignation of Joe Biden from the top spot on the ticket for the Democratic nomination in November, throwing all his delegates and support to Vice President Kamala Harris, the polls gave rising evidence of a likely Trump victory in November. This immediately sent the price of crude oil down, since Trump said his first energy priority would be “Drill, baby, drill.” Trump’s lead also sent the price of gold down, since investors and the world at large anticipated a more stable economy in 2025.

Naturally, the pundits are saying gold declined over “anticipation that the Federal Reserve will announce the start of interest rate cuts at the Federal Open Market Committee (FOMC) meeting next week” (July 30-31), but these pundits are way behind the curve (and historically mistaken) on this broken-record prediction and false assumption about gold’s performance vs. interest rates.

If history is any guide, the Democrats will stage their own emotional rally during their National Convention in Chicago, August 19-22, when there may be some fireworks over their final choice of Presidential and Vice-Presidential names on the ticket. If the ticket seems to be popular, and the Democrats rise in the polls, gold may stage another rally after the Democratic convention.

Exciting times lie just ahead.  First Paris (July 26 to August 11), then Harris (August 16 to 19).  First the “Trump Bump” in July, then the “Kamala Gala” in August, as the Democrats face the dilemma of choosing the right combination to forge a victory over Donald Trump in November.

Use this time before gold makes its next assault on $2,500 to load up on gold and silver coins and bullion products. Call your account representative today – before the Kamala Gala starts!

Biden’s White House Admits Inflation and Deficits are Still Rising

It didn’t make big headlines, but the Biden Administration’s Office of Management and Budget (OMB) just raised its forecast for this year’s Consumer Price Index (CPI) from a rather tame 2.5% up to a relatively sizzling 3.1% annual rate, thereby telling us that the Federal Reserve will not reach its target 2% inflation rate this year. The OMB also raised its fiscal year 2024 budget deficit forecast to $1.87 trillion (6.6% of GDP) and threw in the towel for any future reduction by predicting $1.88 trillion in red ink for fiscal year 2025, starting October 1, 2024.

Inflation at 3.1% surrenders to the reality of “non-transitory” (rather permanent) inflation, but staying near 3% this year, at this point sounds pretty optimistic.  At Freedom Fest in Las Vegas, the cost of the cheapest drinks at our reception was $24, triple the amount of two years ago and bottled water or soda in the hotel room set you back $15. I think they may have been trying to cover for the increased air conditioning costs with temperatures soaring to 117 degrees outside.

While we were in Las Vegas, over two million people in the Houston area lost power for several days. There have also been electricity blackouts all over America due to high heat. Electricity costs are up by double digits, even in the relatively cool Pacific Northwest. In last Friday’s Wall Street Journal (“Get Ready to Pay More for Electricity”), we learned that in Oregon, Portland General Electric (PGE) raised residential rates by about 17% last year and “the company is seeking regulatory approval for another 7.2% increase next year.” This is mostly due to Biden’s Green New Deal power limitations, exacerbated by blue-state beliefs in too many alternative solutions. A more moderate timeline for such transitions would better serve the country.

Due to rising interest rates and housing price inflation, the costs of new mortgages have nearly doubled in the past two years, from $1,746 to $3,322, not counting soaring housing insurance, taxes and local fees.  This doesn’t only affect homeowners but renters, as well. Evictions are up 35% nationwide.  In Phoenix, landlords filed more than 8,000 eviction notices in January, the most ever in the Arizona capital in a single month. Nationwide, the asking rents for houses and apartments are up 30% from 2020 to 2023, according to the Zillow Observed Rent Index.

Ironically, the Federal Reserve will cite rising inflation as its main excuse NOT to cut interest rates on July 31. But high interest rates are one major cause of inflation – not reported in the Consumer Price Index (CPI) – so the Fed could actually help fight inflation and help young aspiring homeowners to afford housing by cutting interest rates now.  Will they?  Not likely.

Gold Price Indicates More Growth Ahead For Investors

After setting another all-time high above $2,470 last Wednesday, July 17, and remaining above $2,450 during most of the Republican National Convention, gold took a predictable step back after the euphoria of the convention ended, dipping briefly below $2,400 on Friday, July 19 before closing at $2,410 on Tuesday, July 23. Likewise, silver remained above $30 during the Republican National Convention last week but dipped down to $29 on Friday and recovered early this week. Now, the short-term direction of the metals may depend on the wording of the Federal Reserve’s Open Market Committee (FOMC) meeting next week, and then how the polls react to the Democrats’ selection of top candidates in August. We’ve seen gold approach $2,500 an ounce, as predicted, so it’s a good time to buy in the dip before the price trends even higher. Like nearly everything else on the planet, gold will continue to rise over time, so invest wisely and protect your financial future now.

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