Gold and silver prices have surged over the past two weeks and have accelerated their upward momentum over the past two business days to new multi-week highs in response to three major messages and events that confirmed what the American public already knew.
The first is rampant inflation, which continues to spiral out of control and reach higher levels. According to the latest data, the consumer price index inflation reached a 41-year high of 9.1%.
This is despite the dramatic and extremely hawkish actions of the Federal Reserve, which has raised interest rates at the last four FOMC meetings. The Fed has been raising rates by 25 basis points since March. The following FOMC meeting in May resulted in the Fed raising rates by 50 basis points, followed by a 75 basis point rate hike at the June and July meetings.
Despite a determined attempt to reduce inflation, the core consumer price index, reported a few weeks ago, fell slightly from 5.9% to 5.7%.
However, last week the government reported that the core PCE price index increased by 0.5%. This means that PCE prices will rise 6.6% year-on-year, while PCE base prices will rise 4.7% year-on-year.
These latest reports show that the Federal Reserve's aggressive interest rate hike has been ineffective in bringing down overall and core inflation. The recent rate hike by the Fed raised the federal funds rate from almost zero to 2.25%, resulting in only one major achievement, if you can call it that. They have effectively reduced the US economy for the past two quarters in a row.
The US economy clearly fits the definition of a recession, no matter what the government wants the people to believe. Thus, a strong move in both gold and silver is highly justified and long overdue.
No matter what the president and other politicians lie to falsely claim that the American economy is strong and growing, it contradicts the truth. GDP for the last two quarters by definition means that America has entered or is in recession.
The dollar has fallen significantly in value. After hitting a high above 109 on July 11, the dollar index is now below 106—a 3% decline in value over the past three weeks.
At the same time, we are seeing spot gold rise:
Silver also rose:
Finally, traders and market participants switched their focus from raising interest rates to rising inflation. The latest government data clearly defines the complete failure of the Federal Reserve's attempt to bring inflation to an acceptable level. Undoubtedly, we are likely to see gold and silver prices continue to rise.