The time to aggressively hold gold is right now, according to the CEO of economic intelligence firm, Quill Intelligence. The analysts says that the Federal Reserve’s looser monetary policy is behind inflation and has left policy makers in an impossible position – one that favours higher gold prices and makes a compelling argument for a gold-focused investment portfolio.
Danielle DiMartino Booth says that the economic stimulus measures pumped into the economy to prop it up during the worst of the pandemic have created a lose-lose situation for the Fed, given its reluctance to accept the real causes of inflation. She said, “Quantitative easing is a failed experiment. We have much more going on here than supply chain disruptions. And there are much more problematic forms of inflation that I don’t think [Fed Chair] Jerome Powell is prepared to acknowledge. But it is the sticky type of inflation that the Fed has to be most concerned with. And that is beginning to bleed through into housing and rental inflation.”
While the Fed has publicly claimed that inflation is transitory on numerous occasions, its persistence suggests that this is not the case and that additional causes are at play. This means the measures taken are not sufficient to stem the rising tide says DiMartino Booth. “I don’t think most people inside the Fed believe in the transitory narrative anymore. Most Fed officials at this point have acknowledged that there’s something much more persistent about this. And, the Fed’s idea that they’re going to let inflation run hot. I don’t think they ever anticipated that it was going to run hot for this long,” she said. “They’re boxed in because the economy is already slowing. They either tighten, or they don’t. Both are policy errors. We had a flash recession. It lasted all of two months. So they’ve kept policy inappropriately too easy for much too long.
“What distinguishes the great financial crisis is that the Fed was able to go at it alone in 2009, 2010, 2011. This time, they needed fiscal money as well. And we’re heading into midterm elections. And I think Washington’s dysfunctionality is on full display. And there’s certainly no reason the GOP would want to help the economy headed into 2022 and the November midterm elections. So the Fed might not be able to go at it alone if the economy does slow.”
The data which suggests that the economy is slowing is already emerging. The New York Times describes the slow down as ‘sharp’ over the summer period. In a report published yesterday (Thursday) the paper’s economic reporter Ben Casselman said that supply chain issues, the spread of the Delta variant, less spending on goods, a lack of demand for bigger ticket items such as vehicles and a lower level of business investment have all caused the decline. He also cites rising inflation, with a rise of 1.3% on consumer goods registered in the third quarter alone, and a year-on-year increase of 4.3% as taking a toll.
None of these issues are quickly solved – but all heavily favour a risk-off sentiment and a bullish gold market. Heed DiMartino Booth’s advice and be aggressive on your gold holdings.