Recent reports confirm high inflation and rising interest rates have led to a recession

Both gold and silver prices have risen dramatically over the past two weeks and have accelerated their upward momentum over the past two days. Gold and silver prices have soared to new multi-week highs in response to three major reports and events that have confirmed what the American public has been acutely aware of for some time. First, that inflation is rampant and continues to spiral out of control and to higher levels. Based on the latest CPI numbers, inflation is at a 41-year high of 9.1%.

This is despite dramatic and extremely tightening action by the Federal Reserve, which has hiked interest rates at larger increments for the past four consecutive FOMC meetings. The Fed will hike interest rates by 25 basis points from March. The following FOMC meeting in May resulted in the Fed raising rates by 50 basis points. This was followed by rate hikes of 75 basis points at the June and July FOMC meetings.

Despite their dramatic attempt to reduce inflation, the core CPI reported a few weeks ago posted a fractional decline to 5.7% from 5.9%. However, today the government reported that the core PCE price index rose by 0.5%. This means that PCE prices are expected to rise 6.6% yoy (yoy) and core PCE prices are expected to rise 4.7% yoy.

These latest reports indicate that the US Federal Reserve’s aggressive rate hikes have been ineffective in reducing “headline” and core inflation. Recent rate hikes by the Federal Reserve have brought the Fed’s policy rate down from near zero to 2.25%, which has only resulted in a major achievement, if you can call it that. They have effectively contracted the US economy for the past two consecutive quarters.

It is emphatic that the US economy has met the definition of a recession, despite what the government would have us believe. As such, yesterday’s and today’s extremely robust moves in both gold and silver are highly warranted and long overdue.

Whatever the President and other political entities do to falsely say that America’s economy is resilient and growing goes against the grain of truth. By definition, GDP for the last two quarters indicates that we have entered or are in a recession.

The dollar has suffered a significant depreciation. After hitting a high above 109 in the week of July 11th, the Dollar Index is now below 106. This is a 3% decline in the last three weeks. At the same time, we have seen spot gold rally from a low of $1683 last week and gain around $102 as of today’s close.

As of 5:15 PM EDT spot gold is currently up $9.14 or 0.52% and is fixed at $1765.34. The August gold futures contract is no longer the most active contract month, now the most active gold futures contract is December, currently trading up $13.50 and fixed at $1782.70.

Silver has had a dramatic gain over the past two days, gaining 7.45% on Thursday and another 2.35% today, taking September’s most active silver contract to $20.335.

Traders and market participants have finally shifted their primary focus from rising interest rates to rising inflation. The latest government data clearly shows the complete failure of the Federal Reserve’s attempt to bring inflation to acceptable levels. No doubt we will most likely see both gold and silver continue to trend higher.

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I wish you good business as always,

Gary S Wagner