Wall Street wants you to focus on how many times the Fed will cut rates this year even though economic data is coming in stronger than expected. Meanwhile, gold set six straight record highs to close over $2,300 recently for the first time ever, exclaims Michael Murphy, editor at New World Investor.
Almost every brokerage firm expects a quarter-point cut at the June 12 Fed meeting, followed by two or three cuts through the end of the year. I have a different view. Powell really is “data-dependent.” So, he will wait until he sees at least early signs of weakness before cutting rates. That’s because:
(A) This is an election year when presidents of either party benefit from initial data releases showing a strong economy (that are quietly revised lower later)
(B) Government economists mostly use trendline models to estimate those data releases, so they miss inflection points when things change, and
(C) There’s a lot of anecdotal evidence that economic activity is weakening.
I still expect the Fed to yet again cause a recession, this time mild and brief.
Meanwhile, gold is rising and silver just hit its highest level since March 2022. Is the long-awaited silver squeeze on the fraudsters happening? Costco Wholesale Corp. (COST) is now selling silver bars in Canada with strict limits and no refunds.
Normally, gold goes up when the outlook for interest rates is lower, and gold goes down when the outlook shifts to higher. For the past few weeks, Treasury yields have trended higher and Wall Street gurus have trimmed their outlook for Fed rate cuts, yet gold has surged to an all-time high.
That tells you two things: (1) Demand for gold is really strong and (2) something else may be going on. “Something else” may be the early recognition that $1 trillion in new debt every 90 days may keep the economy humming, but could be devastating for the dollar. We shall see.
The fractal dimension said: “I am gold; hear me roar.” A new trend has started with a lot of energy to power it.
Recommended Action: Buy gold.
