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Metal Market Report September 2021 - Week 5 Edition

September 2021 - Week 5 Edition

Gold Not Reacting Typically But Poised For Gains

Gold began the week at $1,750, but when Janet Yellen almost lost her composure worrying about the national debt, gold fell $15 instead of rising. Among her comments to Congress, she said, “If the debt ceiling is not raised, there would be a financial crisis, a calamity. It would undermine confidence in the dollar as a reserve currency … It would be a wound of enormous proportions.” For emergency tax raising purposes, she even floated the idea of taxing “unrealized gains,” meaning the value of your home and business, your stocks, gold and all you own – before you sell anything! That’s clearly a non-starter, but it might put her near the top of the list of The Most Dangerous People in Washington. What’s most amazing is that gold declined rather than rising after her Apocalyptic comments to Congress on Tuesday.

So far this year, gold is resisting all the historical reasons why it usually rises, including soaring inflation, political unrest, massive deficits, a looming debt showdown and a possible government shutdown, plus the normal rise in demand for gold jewelry for the upcoming holiday season. One consolation is that gold is holding up better than Bitcoin in recent crisis situations. On Monday, September 20, when markets panicked over China’s debt default, gold rose 0.56% and Bitcoin fell 8.54%, and on Tuesday, September 28, gold fell $14 (0.8%), while Bitcoin fell over $1,500 (-3.8%), following Janet Yellen’s testimony. Further proving Bitcoin’s volatility was its large drop after China declared all cryptocurrencies illegal this past week.

Rare Gold Coins Have Risen in 2021, Despite Gold’s Lackluster Performance

Despite gold’s weak performance in 2021, a leading dealer price guide reflects rising bids for selected rare gold coins between March and September of this year. In those six months, gold rose barely 1%, but as you can see in the following price list, a sampling of some of the coins we have been recommending most actively in our Project 2020 and Select Four programs are up significantly more. This is why we recommend a balanced portfolio, include both bullion and rare coins, focusing on gold coins from our Select Four program.

Going back further, to March 2019, most of these coins are up significantly more than gold bullion in this same dealer bid guide. For example, the MS69 1989 American Eagle $25 and MS69 1995 $25 are up over 130%, and the MS63 1908 $2 ½ Indian and MS63 1895-S $20 are up 90%, while gold bullion is up 36%.

 

Fossil Fuels are at Seven-Year Highs – and This Inflation is Far from “Transitory”

All year long, the Federal Reserve Board and its staff of 300 PhD economists were saying that this latest round of inflation was “transitory.” We begged to differ, in several issues of this Metals Report. In June (Week 3), we wrote, “The Federal Reserve is meeting this week and will make its public announcement on Wednesday. It will be interesting to note if they feel that all of these price gains are ‘transitory.’ Is wage inflation transitory? Are energy gains transitory? Industrial metals? Food? It seems clear the Federal Reserve Governors seldom gets out of their Ivory tower to buy gas or groceries – or a pickup truck!

We repeated this critique of the Fed in August, Week 1: “We wonder on which planet the President lives. Perhaps it’s the same planet where the Fed Chairman Jerome Powell says inflation is transitory. The Fed Chair has finally admitted that he may be wrong. In his press conference on Wednesday, July 28, Powell conceded that the strength and length of the inflation siege has caught him by surprise. As we have repeatedly said here, the Fed Governors (and the President) ought to get out and try to buy a tank of gas or a week’s worth of groceries once in a while to see what the American public experiences every week.”

In his testimony before Congress on Tuesday, September 28, 2021, Fed Chairman Jerome Powell again admitted that inflation was “larger and longer lasting than anticipated,” but, if it continued, the Fed “had the tools” to bring it back down. Hmmm! I wonder how those “tools” might work in the energy market.

That same Tuesday morning, West Texas Intermediate Crude, the benchmark oil price in America, surpassed $76 for the first time since late 2014. Oil is now near a new 7-year high, despite the concerted effort of the Biden Administration to wean America off of fossil fuels in favor of higher-priced, volatile and scarcer renewable sources. Despite the purported virtues of renewable energy, the reality is that most of the world is still hooked on fossil fuels. At the start of 2020, fossil fuels supplied 84% of the world’s energy, while renewables made up only 5% of energy usage – or 11% if you include hydroelectric power.

The price of gasoline at the pump is up over 50% since Biden took office in January, but the rise in the price of natural gas is more than double that of oil or gasoline. Since the start of 2021, the price of natural gas futures has risen over 130%, from $2.54 at the start of 2021 to $5.89 as of September 27, 2021. This is of particular concern since it comes well before winter heating season, when prices normally rise.

What about gold? In the 1970s and 1980s, gold and oil tended to rise and fall in tandem, but that is no longer true. Last year, silver was the #1 performing commodity, followed by gold, while oil had a terrible year. This year, the opposite is true: Energy prices are soaring while gold is in the doldrums. Over long time periods, however, gold has outperformed crude oil and most other commodities as a proven inflation hedge. Call your representative today to learn more about how you can protect your investments with precious metals.

 

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