Peter’s back in Puerto Rico this week for his podcast after another week of record gold prices. In this episode, he discusses media coverage of inflation, this week’s CPI report, and Bitcoin’s weakening price relative to gold.
Peter starts by recapping this week’s price action and movements in the dollar’s strength. The dollar is currently performing better than other foreign currencies, but that doesn’t mean it’s doing well:
“The dollar index was up today, but that doesn’t mean the dollar was up. Gold tells you the dollar was down. What the rising dollar index tells you in an environment of a rising gold price is that the dollar is losing value. It’s just losing less value than the euro— or losing its value more slowly than the euro or the pound or the yen. That’s what’s happening. I mean, if I’m going backwards at 10 miles an hour and there’s a car next to me going backwards at 20 miles an hour, relative to that car, I’m going forwards. But I’m not. I’m actually going backwards. I’m just going backwards more slowly than the other car.”
The financial press is either completely oblivious to the reasons gold is surging or they’re choosing to provide political cover to policymakers responsible for inflating the dollar:
“Like I said with the canary and the coal mine, instead of recognizing, ‘Gee, gold’s going up because of inflation,’ they’re making up other reasons for why gold’s going up. Like the Canary died of a heart attack. ‘Gold’s going up because of geopolitical risk.’ They don’t want to admit that gold’s going up because of inflation, because the Fed is making a mistake, because these rate cuts are wrong, because they should be hiking rates. So they [the press] do this whole segment on inflation, and they don’t even mention gold.”
With persistent evidence of inflation, the media is at least starting to question the narrative that we need more interest rate cuts:
“They’re now starting to say, ‘Hmm, maybe we’re not going to get any cuts.’ They’re not saying that we’re going to get hikes. … They are starting to question the validity of the cuts, but nobody is questioning the reality of the fact that they should never have stopped hiking— that that’s what the rising gold price is signaling, that interest rates are too low and that they need to go up. Not just in the US, they need to go up everywhere. … Everybody has to raise rates sharply. I’m not talking about ‘mamby-pamby’ quarter point rate hikes. We need 200 basis point hikes.”
Gold’s and silver’s bullish streaks bode well for the metals, but not for Bitcoin and other cryptocurrencies:
“The price of Bitcoin is down to about 18.6 ounces of gold. The high was 27 two and a half years ago. So we’re getting deeper into bear market territory. None of these Bitcoiners want to acknowledge this. Despite all the hype, ETFs, all this big rally, Bitcoin never made a new high in real money. And it may not.”
Wednesday’s CPI came in hot again, with a 0.4 percent increase from last month. Year-over-year inflation is now at 3.5%, which is not close to the Fed’s 2% target:
“If you were objective and just looking at the CPI, you would say, ‘Oh, we better hike rates. Inflation is going up, not down.’ But they’re still saying, ‘No, no, no, we’re expecting to cut rates.’ Why? Based on what would you expect to cut rates? Certainly not based on the data. The data doesn’t support a rate cut.”
Between increasing institutional demand for gold and strong evidence of future inflation, the fate of the dollar does not look good:
“Imagine how much stronger [gold’s] going to be when the dollar is going down, and it will go down. And if anything, the rising gold price is what will cause the dollar to go down, because at some point when gold gets high enough, there will be a stampede into gold by foreign central banks, by the public, by hedge funds, pension funds, and endowments. And where are they going to get the money to buy all that gold? They’re going to use dollars. So the dollar is going to get killed. It has no chance against gold.”
The next few months will be critical for the American and global economies. If the Fed continues its inflationary policy, it will spell disaster and worsen the coming crisis.
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