Gold

For the first time since the onset of the global pandemic, which began in March 2020, the Federal Reserve began dramatic steps to keep the economy from crashing and then create an accommodative monetary environment for the economy to recover once the vaccine rollout began.

Gold futures experienced the largest percentage drop, even bigger than January 8, 2021, when market forces drove the precious metal 4.18% lower. Currently, gold futures basis, the most active August contract, is trading at $1770.90, a net decline of $90.50 or 4.85%.

In yesterday’s opening letter I spoke about the fact that analysts seemed to be divided into two camps in regards to how they view the current monetary policy of the Federal Reserve. My view was that the Federal Reserve would maintain its dovish monetary policy, remaining extremely accommodative and continuing to keep interest rates near zero.

Tomorrow at 2:30 EST, this month’s FOMC meeting will conclude, which will be immediately followed by a statement and a press conference including a question-and-answer period by the chairman of the Federal Reserve, Jerome Powell. What information the statement conveys as well as Chairman Powell’s press conference will illuminate the Federal Reserve’s monetary policy in regards to their asset purchases and mandate to keep interest rates between zero and 25 basis points (1/4%).

Beginning tomorrow, the Federal Reserve will begin its FOMC meeting for June, which will conclude on Wednesday. Following the conclusion, the Federal Reserve will release a statement, which a press conference will follow by Chairman Jerome Powell.

The most recent consumer price index data, which was released yesterday, indicated that the annualized inflation rate is now at 5%. This is the highest level of inflation since the recession following the banking crisis in 2008.

As many economists had forecasted a big uptick in inflationary pressures, on this occasion they got it right. Economists polled by Dow Jones and The Wall Street Journal predicted that we would see ½ a percent increase in the rise of inflation as monitored through the consumer price index (CPI). Unquestionably the costs of goods and services, which can be easily expressed is the cost of living is now at 5%, after a net gain of .06%, which is 1% above forecasts for this month’s report.

Although gold closed fractionally higher in New York today, as of 5:35 PM EST, gold futures basis the most active August 2021 Comex contract is trading down $3.70, currently fixed at $1890.70.

Gold futures opened at $1901.60 this morning; it is currently down $3.10 and trading at $1895.80. Unquestionably gold continues to remain the primary precious metal that is a hedge against inflation. Gold has the same buying power as it has had for the last 100 years.