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“April 2021 money supply and monetary base growth continued to explode” – John Williams, Shadowstats.com
Williams is referencing the “base” monetary aggregates which are compiled monthly. The Fed’s balance sheet grows by the week, hitting $7.935 trillion as of June 3rd. It’s doubled plus another 13% since September 2019, when “QE” was restarted.
The rate of growth in the money supply is unprecedented in history. The price inflation effect of the money printing showed up first in the financial markets: stocks, bonds and housing prices (yes, because most homes are purchased using a high loan-to-value mortgage, homes can be considered financial assets). Now the devaluation of the dollar is showing up – uncontrollably – as price inflation across goods and services.
It’s ludicrous for the Fed to promote the idea that the spike up consumer prices is “transitory.” Just like it was absurd for Ben Bernanke in 2007 to proclaim that subprime mortgage defaults were “contained.” As long as the Fed’s balance sheet keeps expanding and the money supply continues growing, price inflation will get worse.
It many not feel like it because of the volatility in the sector and because of the hype in the media about the general stock market, but gold is up 12.7% and silver is up 15.3% since March 30th. Since March 1st, GDX is up 30.3% while the S&P 500 is up 7.9%. If the SPX had risen 30.3% since March 1st, the anchors on CNBC would be doing naked cartwheels on live television.
The point here is that the precious metals sector, in spite of the intense manipulation right now, is starting to reflect the soaring rate of dollar devaluation/price inflation. After the run in the precious metals starting in March, it’s likely we’ll get a brief period of technical consolidation with some two-way volatility. But more money printing and deficit spending will be generated to prevent the economy from falling apart again, which will be rocket fuel for the precious metals sector.
Gold is now making a serious run at the $1900 benchmark and silver is challenging $28. I expect both metals to undergo two-way volatility around those two key technical and psychological price levels for at least a few weeks. But I would not be surprised of both price levels have been left in the rear-view mirror by the July 4th holiday.
Wall Street Silver invited me back on to their excellent podcast to discuss ongoing developments in the precious metals sector and the factors that will drive the price of gold and silver much higher than the current price level:
Watch the session here.
- Dave Kranzler
Investment Research Dynamics