Gold reaches historic milestones, inflation and dollar weakness drive precious metal price rise

In the latest episode of Money Metals Midweek Memo In the podcast, host Mike Maharrey discussed the ongoing impact of inflation, Federal Reserve policy, and the latest developments in the gold and silver markets.

Maharrey opened the discussion by comparing the Federal Reserve's denial of responsibility for inflation to a guilty child who refuses to admit wrongdoing. He stressed that despite attempts to blame external factors such as “Putin” or “greedy corporations,” the Fed's policies have undeniably contributed to rising inflation.

Inflation and interest rate cuts

Maharrey addressed a common misconception: that inflation is “fixed.” He pointed out that many believe rate cuts are imminent, with some speculating that a half-percent cut could come as early as September. This expectation has led to a rise in gold prices as investors anticipate a return to looser monetary policy. Maharrey emphasized that this optimism about rate cuts has helped gold hit new records.

Last week, gold prices reached a major milestone on Friday when a 400-ounce bar of gold crossed the $1 million mark for the first time. Gold prices reached $2,500 per ounce and rose even further to $2,531 per ounce by Tuesday before declining slightly. Overall, gold prices have risen by over 22% this year, reflecting the weaker U.S. dollar and growing investor interest.

Dollar weakness and gold price rise

Maharrey explained that the rise in gold prices is not only due to the metal's rise in price, but also due to the weakening dollar. The US dollar recently hit a seven-month low, driven by expectations of a looser monetary policy from the Fed. With the Fed potentially increasing the money supply, every dollar loses value, making gold more expensive in dollar terms. Maharrey stressed that this is a direct result of inflationary monetary policy.

Quiet steps by the Federal Reserve and concerns about the balance sheet

The podcast also touched on the Federal Reserve's recent actions to quietly reduce its balance sheet, a move that began back in June. Maharrey pointed out that the Fed has only unwinded about $1.6 to $1.7 trillion of the $4.5 trillion added to its balance sheet during the pandemic, so most of the inflationary impact is still circulating in the economy.

Global gold demand and central bank actions

Maharrey stressed that global demand is driving gold prices, particularly in China and India, the world's largest gold consumers. The People's Bank of China recently increased gold import quotas for commercial banks, indicating a possible revival in demand despite high prices. Indian gold demand has also surged following a cut in import duties in late July. These trends further underpin the bullish outlook for gold.

The undervalued position of silver

Silver also saw a significant increase, rising about 16% since last Wednesday and approaching the $30 per ounce mark. Despite this increase, the gold-silver ratio remains at about 85:1, suggesting that silver is still historically undervalued compared to gold. Maharrey pointed out that silver often performs better than gold in bull markets and that industrial demand for the metal, particularly in the solar energy sector, continues to grow. After three consecutive years of market deficits, silver's supply constraints further reinforce his bullish outlook.

Misconceptions about inflation

Maharrey stressed that inflation remains a problem despite the recent cooling of the Consumer Price Index (CPI). He debunked the myth that inflation is “over” or that prices are falling, explaining that inflation merely means the slowing of price increases, not the price decline itself. Even if inflation rates are easing, prices are still rising, albeit at a slower pace.

Maharrey also criticized the Federal Reserve's inflation target of two percent, calling it an arbitrary number with no real scientific basis. He stressed that this policy effectively devalues ​​the dollar over time, leading to a loss of purchasing power.

The need for real money

To conclude the episode, Maharrey urged listeners to protect their wealth by converting the depreciating dollar into real money – gold and silver. Since inflation is likely to continue for political reasons, he recommended that investors add precious metals to their portfolios to hedge against the continued decline in the dollar's value.

For those who want to explore their options, Maharrey recommends contacting Money Metals Exchange for advice on which products best suit their investment goals.

Key findings:

• Gold prices reached an all-time high, with a 400-ounce bar costing over $1 million and the price of gold rising to $2,531 per ounce.
• The weakening US dollar due to expectations of looser monetary policy has led to a sharp increase in the price of gold.
• Silver remains undervalued by historical standards, with rising industrial demand and supply constraints providing an optimistic outlook.
• Despite the assumption that inflation has been “fixed,” prices continue to rise, albeit at a slower rate.
• Investors are encouraged to protect their wealth by converting dollars into precious metals as inflationary policies continue.