The Week in Review

This past week was very clearly another “risk off” week as evidenced by a pull­back in both the S&P (-2.83%) as well as the Rogers Raw Materials Index (-3.23%) and a dramatic rise in both the T-Bond and gold. Silver, which is part commodity and part monetary metal, also rose 3.17%.  The Rogers Raw Materials Fund is heavily weighted toward oil and gas, which suggests weaker economic activity, as does the copper price, which was down again this week. 

Mish Shedlock put out a very good piece this week (you can access www.Mining­ that makes the point gold is on the move not because of price inflation but because of a growing lack of confidence in central banks.

Part of the evidence he provided is in the chart on your left, which shows gold rising relative to Dr. Copper. If price inflation were causing gold to rise, then gold should not be rising vis-à-vis the metal most important in industry. Of course, the fact that the T-Bond markets are also on the rise suggests the markets are doubting the growth propaganda coming out of the Trump Administration, which in my view has always been overstated. And the problem is, there is no way out of the hole central banks around the world have dug themselves into. Easy money manufactured with debt (as opposed to money mined from the ground) has led to the need to continue to print more and more money faster and faster just to keep the system from imploding. But in the process, the system becomes ever more toxic, which is now very evident from large portions of the world experiencing negative rates. It isn’t prices that are hyper-inflating but rather its debt, and so having pulled consumption forward by many years if not decades, Mother Nature is now demanding a day of reckoning. This is horrible for the future of our world. No one in their right mind could wish for what is happening. But the day when gold would rise exponentially and confidence in fiat money is lost was predictable and it seems to now be approaching very quickly.  

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