09-Sep (USAGOLD) — Gold remains defensive heading into the weekend, but is
still trading higher on the week. Uncertainty about the Fed’s next move keeps
the market on its heels, but geopolitical concerns centered on North Korea’s
latest nuclear test should limit the downside.
Global stocks are lower today after North Korea conducted another nuclear
test. Geopolitical instability in Asia seems to be generally on the rise,
which could very well bolster gold as a safe-haven alternative to shares.
We saw a mix of hawkish and dovish FedSpeak this morning. Boston Fed dove
Eric Rosengren adopted towed the company line in advocating for gradual policy
nomalization. “Failure to continue on the path of gradual removal of
accommodation could shorten, rather than lengthen, the duration of the
recovery,” he said. Of course what is really meant by “gradual” remains
opaque: One 25 bps hike every 12-months?
Daniel Tarullo wants to see more evidence in the data, particularly on the
inflation front. He even sees further room for improvement in the labor
market.
Robert Kaplan of the Dallas Fed also notes “frustratingly slow progress on
inflation.” While he went on to reaffirm that the tightening path will be
“very shallow and very flat,” he cautioned that the markets has received
“plenty of notice” that the Fed is looking for the opportunity to raise
rates.
According to a Bloomberg
article this morning, Deutsche Bank analysts are warning that a new
multi-decade-long economic cycle is kicking off, where they expect weak
growth, higher inflation, and stagnant productivity in developed countries.
They warn that this cycle will roil bond investors in the decades to come;
and as if on cue, global bonds are getting hammered today.
Hmmmm, ‘weak growth, higher inflation, and stagnant productivity’ . . .
sounds like stagflation to me. The last time the U.S. suffered through a bout
of serious stagflation was in the 1970s. During that decade, gold rose from
$35 per ounce to $512 per ounce, a tidy gain of 1,360%, suggesting that the
yellow metal is the ideal stagflation hedge.
Please read Gold
as a stagflation hedge, by USAGOLD’s own Michael J. Kosares. If the bond
bubble does pop, you’re definitely going to want some gold.
