The Eagle Soars

The mint sold 147,000 ounces of American Gold Eagles in varying denominations

totaling 200,500 coins. That was a 67% increase from March. For the year, gold bullion demand is up a staggering 617%.


When you factor out COVID-19-related sales disruptions, bullion sales are up 400% over the 5-year average between 2015 and 2019.


Data from the U.S. Mint regarding sales of American Gold Eagles confirms this up move in the coins.



From late February to mid-March 2022, gold prices surged, mostly on ‘haven flows’ due to the war in Ukraine. In the following six weeks to mid-April, gold remained high, while US real rates shot up.


However, gold has fallen back recently and reconnected to its main driver, real yields. Strategists at Société Générale note that real rates are a key driver of gold.



Real interest rates/gold relationship can break down when exceptional Events Occur.


“The relationship between gold and market-based real rates is very strong over time but it suffered two short-lived dislocations early this year and post the onset of the Ukraine war.

But although both dislocations proved temporary, other gold price drivers are currently bullish. To name just a few: The Ukraine war and other geopolitical risks, fears of inflation-induced recession, global supply chain weakness and flows into gold ETFs and moves by non-US-aligned central banks to ‘de-dollarise’ their reserves.”


For reference here is Gold Futures (August 2022) 1 year chart.

 

Chairman Powell and The Federal Reserve have been on a crusade to navigate the U.S. economy to a soft landing rather than a hard crash as it struggles to fight 40-year high inflation while averting a recession.

  • Judy Shelton, of California, to be a Member of the Board of Governors of the Federal Reserve System for the unexpired term of fourteen years from February 1, 2010, vice Janet L. Yellen, resigned.

Known for her advocacy for a return to the gold standard and for her criticisms of the Federal Reserve (which she has compared to the Soviet Union's economic planning). Trump announced on July 2, 2019, that he would nominate Shelton to the Fed.


Her nomination stalled on November 17, 2020, with a 47–50 vote in the Senate, and her nomination was eventually withdrawn by President Joe Biden in February 2021


Can the central bank achieve this ostensibly difficult objective?


If the central bank’s track record is anything to go by, the Fed is “not omniscient,” says Judy Shelton a senior fellow at the Independent Institute and former Federal Reserve board nominee, in a recent interview.


According to Shelton, it will be challenging to prognosticate the lasting effects of pushing up the benchmark Fed funds rate to a neutral level after exerting tremendous influence on the economy for the last two years.


“I think it’s also hard to say what will be the impact and what will be the timing of the impact of ratcheting up interest rates to the point where they choke off real economic activity,” she said. “There’s a big difference in saying money that comes from speculating on money that can generate income, versus GDP growth that reflects an increase in the level of goods and services available.”


Fundamental Monetary Reforms


Overall, Shelton does not think the Federal Reserve has done a good job since the beginning of the coronavirus pandemic. But while missing the mark on inflation has severely hemorrhaged its reputation, the fact that the Fed has turned into “too big a factor in determining economic outcomes” is the problem.


“I think that they deployed the airbag in March 2020. I believe that they did not understand, at the Federal Open Market Committee, the need to get the car back on the road,” the economist stated.

“I think the Fed is far too big a factor in determining economic outcomes. I think that it is exerting too much influence over financial markets.


After attempting to control the money supply by manipulating interest rates, the central bank’s only recourse in managing price stability “is to kill the economy.”


In this environment where many economic experts believe the Fed has destroyed its credibility by claiming for nearly a year that inflation would be transitory, is it time for changes to monetary policy?


 

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