by Alasdair MacLeod
Gold and silver drifted lower this week in moderate volumes for Comex gold and low volumes for silver. This morning in Europe gold traded at $1935, down $29 on the week, and silver was $26.70, down $1.35. This consolidation phase has now lasted nearly a month.
This inflation driven run commenced on 23 March when the Fed, after cutting its funds rate to 0% from 1% the previous week, announced infinite inflation in view of the lockdowns taking place at that time. The five-month run to all-time highs for gold in early August can be viewed as an adjustment in the price to take account of the Fed’s covid-driven monetary policy. The official story, swallowed by the investment community and still being pushed today, is that of a V-shaped recovery once the lockdowns end. Now that businesses and consumers are cautiously emerging from their covid bunkers, precious metals markets are waiting to see if the V-shaped recovery is intact. If not, we can expect a second wave of monetary easing, signalled by Jay Powell in his Jackson Hole speech last week.