This is what has gold attacking the $1,900 level and silver above $28.
May 25 (King World News) – Peter Boockvar: One of the few so called hawks in the Federal Reserve, KC Fed Pres Esther George, spoke last night as I mentioned yesterday. On inflation she said this:
“While it is clear that several temporary factors are boosting inflation now, I am not inclined to dismiss today’s pricing signals or to be overly reliant on historical relationships and dynamics in judging the outlook for inflation…Measures of inflation expectations, both from surveys and financial markets, have moved up as the economy has reopened and strong fiscal stimulus has boosted growth.”
She acknowledged though that “In the near term, it can be difficult to distinguish between a string of seemingly idiosyncratic bottlenecks and a broader based lack of capacity” and that is for sure the biggest question.
I want to repeat again that this ‘transitory’ or not debate is all about goods inflation. Outside of 100 yr pandemics and deep recessions, there is no such thing as ‘transitory’ services inflation. It is instead ‘persistent.’ Over the past 20 years, services inflation ex energy has averaged an annual increase of 2.7%. It has been the lack of any goods inflation that has been the offset. Over the past 20 years core goods prices have averaged ZERO. So, with services inflation reaccelerating again with the reopenings and particularly the resumption of higher rents, we now have for the 1st time in decades a combination of services and goods inflation. To George’s point, what will be of goods prices is the only question here.
She gave no sense on when she wants to start the taper but did say that MBS would be a part of that discussion, “it is a fair question to ask to what extent do those asset purchases differ than the Treasury purchases?” With the Federal Reserve responsible AGAIN for pricing out young, 1st time home buyers from buying a home, it better be.
With respect to US yields, I’ll repeat my belief that the move in yields to almost 1.80% in March from .90% at the end of December captured the current inflation stats we now currently see and thus a rest was needed after the rapid move. It won’t be until June thru August that we digest more inflation stats and can better determine how temporary the flare up currently is before yields break out, in either direction, of the 1.50-1.75% trading range…
Billionaire Eric Sprott bought a 20% stake in a mining company
to find out which one click here or on the image below
I still believe though that the break out will be to the upside and 2%+ is where we are eventually headed. With respect to positioning on this belief, I still like energy stocks, ag stocks, bank stocks, some selective value/dividend payers, precious metals, bets on yield steepeners and inflation, Asian stocks and bonds and stocks in the UK. Unfortunately I’m not allowed to name names.
Germany’s May IFO business confidence index rose to 99.2 from 96.6 and that was 1.2 pts above the estimate with both the Expectations and Current Assessment components higher m/o/m. As the IFO is always succinct, something I try to relate to, they simply said “The German economy is picking up speed.” Notwithstanding the beat, German yields are lower, following the US move. The euro though continues higher and now sits at the best level vs the dollar since early January and the dollar weakness today is broad based. The DAX is at a fresh record high.
To listen to Peter’s predictions for silver, gold, and other global markets CLICK HERE OR ON THE IMAGE BELOW.
***To listen to Alasdair Macleod discuss the end of the paper gold and silver markets, LBMA troubles, and Basel III rules impacting gold CLICK HERE OR ON THE IMAGE BELOW.
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