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Approaching the End of Gold’s Decline

Summary:
This was a good week for “good inflation”—in other words, stocks and bonds. But that’s not to say all is well in America’s financial markets. To the contrary, I would urge you to read Alasdair’s latest article titled “Returning to sound money.” Alasdair argues that a return to gold-backed money is inevitable. But there will likely be some extreme difficulties before Nature’s laws that apply to economics are forced on politicians. Bob Hoye sent a reminder to me today discussing the signs of an ending financial bubble. Among those signs are falling “real” interest rates and a decline in the real price of gold. Both of those have been happening in spades, though there is some evidence we may be approaching the end of gold’s decline in real terms. And from a global perspective, it may be that

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This was a good week for “good inflation”—in other words, stocks and bonds. But that’s not to say all is well in America’s financial markets. To the contrary, I would urge you to read Alasdair’s latest article titled “Returning to sound money.” Alasdair argues that a return to gold-backed money is inevitable. But there will likely be some extreme difficulties before Nature’s laws that apply to economics are forced on politicians.

Approaching the End of Gold’s DeclineBob Hoye sent a reminder to me today discussing the signs of an ending financial bubble. Among those signs are falling “real” interest rates and a decline in the real price of gold. Both of those have been happening in spades, though there is some evidence we may be approaching the end of gold’s decline in real terms. And from a global perspective, it may be that the decline of real interest rates may be about to reverse course as well, given that junk-bond yields in China have jumped from 7% to 25%.

Approaching the End of Gold’s Decline

Then there was this bit of news on Friday, November 19, from Fed Vice Chair Richard Clarida, who indicated he thought it may be appropriate for policymakers to discuss next month whether to speed up the tapering of bond buying after inflation surged and job gains picked up. He said in response to questions during a virtual event: “I’ll be looking closely at the data that we get between now and the December meeting.” It’s important to note that Clarida is a voting member of the Fed Board, so his words sent gold down sharply on Friday.

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