On a day when the gold market closed above $1,750, here is a look at what is propelling gold and stocks.
Things Could Get Messy
June 22 (King World News) – Peter Boockvar: After going out for dinner Saturday night for the 1st time since late February, I believe this country can reopen safely but not without strict mask wearing. And that is just what the economic pace of the reopening is going to come down to. To my readers I’m just stating the obvious but I felt the need to say it again. Yes, we need a vaccine and effective therapeutics before safely going to a baseball game or concert but I believe the rest of the economy can power thru this but only with mask wearing.
This all said, I still believe it will take years to get back to the GDP level of Q4 2019 and January and February of 2020 even with a vaccine as profit margins compress as the cost of doing business goes up in a post covid world, supply chains will take time to readjust, consumers save more and spend less, companies focus on their balance sheets, inflation comes our way and the Fed will need to reign in their waterfall liquidity spigot that will only be messy when they do considering how far they have gone over the past few months…
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QE Is Not Free, It’s A Dangerous Drug
It’s not everyday that you hear humility from a central bank head and one that thinks about the exit soon after going whole hog thru the monetary easing front door. It certainly is nothing I’ve ever heard from a Fed Chair who always seems to want to play the role of Superman and assumes no negative side effects of their actions. Andrew Bailey, the Governor of the Bank of England wrote an editorial today defending the actions they’ve taken but also saying:
“But the financial system mustn’t become reliant on these extraordinary levels of reserves…the current scale of central bank reserves mustn’t become a permanent feature. As economies recover, it’s likely that some of the exceptional monetary stimulus will need to be withdrawn, including by reducing reserves. This wouldn’t take us back to the very low levels of reserves before the financial crisis, which sometimes failed to recognize the role they play in ensuring the stability of the financial system. But elevated balance sheets could limit the room for maneuver in future emergencies.”
My bottom line, the cost of money printing and QE is not free. It’s a dangerous drug to get hooked on and we’ve seen just how impossible it is to get off.
***To listen to James Turk discuss the failure of London Gold Pool II and the price of gold hitting new all-time highs along with silver click here or on the image below.
Gold Spikes To $1,765 And Silver Surges
***Also Released: Major Gold Breakout Targets $1,800 Followed By New All-Time High Above $1,920 CLICK HERE.
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