With the price of gold surging over $30 and silver approaching $24, Michael Oliver, the man who is well known for his deadly accurate forecasts on stocks, bonds, and major markets, communicated to King World News that $8,000 gold and $240 silver are realistic expectations.
February 14 (King World News) – Michael Oliver just issued the following statement: “If this recent major upside breakout by the spread’s momentum—above a six-year-wide base—were to carry to 3%, then even if gold were only $2,000, silver could reach $60; with gold at $8,000, which would be reflective of its prior bulls trends that achieved seven- to eight-fold gains from bear low to bull high, then silver would be $240. Regardless, the potentials for silver to massively outperform gold are evident.”…
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The Bottom Line
Peter Boockvar: As I said last week, Powell will end up having to decide and hopefully either he, Brainard or Williams (the Fed troika) will lay their cards out before that March meeting so we don’t have to wait so long. Either way, and I’ll bottom line it, there is no magic end point here that the Fed will map out. They will stop when markets get to a pain point they can’t tolerate anymore and when they see the economy growing with under a 1 handle or less. If history is any guide over the past 40 years, we just have to assume that the end fed funds rate will be below its previous peak.
As the debate in the meantime will take place of how far behind the Fed is, here are some simple metrics that we’ll compare today with yr end 2019 before Covid was a household virus. The 5 yr inflation breakeven was 1.70% vs 2.92% today. The 10 yr breakeven was 1.79% vs 2.48% today. The CRB raw industrials index is up by 43%. The CRB food index is higher by 59%. CPI in December 2019 was up 2.3% y/o/y vs 7.5% last month. Average hourly earnings grew by 2.9% in December 2019 y/o/y vs 5.7% in January 2022. The fed funds rate was 1.75% in December 2019 vs zero today. The Fed balance sheet stood at $4.166 Trillion at year end 2019 vs $8.878 Trillion as of last week.
No War
The only expertise I have on Vladimir Putin is reading the book ‘Putin’s People: How the KGB Took Back Russia and Then Took on the West’ written by Catherine Belton and which I highly recommend and published in April 2020, but if I can place a bet on Draft Kings on war or no war, I’d bet no war. Brent and WTI are modestly lower after Friday’s spike but natural gas prices are up another 5.5% although are still below where they were 3 weeks ago. Stocks are sharply lower and bond yields are falling. Wheat is back to $8 per bushel.
The January 2022 Survey of Consumer Expectations from the NY Fed showed some moderation in inflation expectations for both 1 yr and 3 yrs out. For one year out, they fell by .2% m/o/m but to a still very elevated 5.8%. It’s the 1st m/o/m drop since October 2020. For 3 yrs, the median pace of inflation is expected to be 3.5% vs 4% in December. The NY Fed said this 5 tenths drop was “broad based across age, education and income groups and is the largest one month decline in the measure since the inception of the survey in 2013.” There is still a high level though of ‘inflation uncertainty’ with both well above pre Covid levels.
Expectations for home prices rose further, as “The increase was most pronounced among respondents with no more than a high school education and those who live in the West and Northeast.” Expectations for commodity prices were little changed, down by .1% in each category.
More saw a rise in unemployment one yr from now but income expectations were unchanged m/o/m. Of note, “Respondents were slightly more pessimistic about their household’s financial situation in the year ahead, with more respondents expecting their financial situation to deteriorate a year from now.”
Bottom line, I would attribute the 5 tenths drop in 3 yr inflation expectations to 3.5% to the expectations that interest rates are now moving higher and the Fed is tightening policy as it is for sure nothing that consumers are seeing right now in real life where one year expectations are still very high at 5.8%. This compares with 2.5% in February 2020. This said, hopefully we’ve reached peak inflation on a rate of change basis and if correct, the only question remains is to what level it settles out at. You know my stance on that.
To this on interest rates, on the question of where the average interest rate will be on a savings account 12 months from now, 30.5% said higher vs 28.2% in December. “This is the highest reading of the series since May 2019.”
To listen to James Turk discuss his outlook for gold and silver in the coming weeks, months and years CLICK HERE OR ON THE IMAGE BELOW.
To listen to Alasdair Macleod discuss the breakout in gold and what to expect next CLICK HERE OR ON THE IMAGE BELOW.
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