GOLD 00.00 1.20 0.00%
SILVER 00.00 1.20 0.00%

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Metal Market Report July 2021 - Week 2 Edition

July 2021 - Week 2 Edition

Gold Roars in July

Gold Rose 1.54% Last Week and has remained over $1,800 since Monday morning, July 12. Overall, gold is up 3.35% so far in July. Gold is now trading at its highest price in four weeks, since June 16, partly on Tuesday’s Consumer Price Index (CPI) inflation, ongoing concerns about rising COVID-19 cases and in anticipation of testimony by Federal Reserve Chairman Jerome Powell on Wednesday, July 14. That same morning, after the second inflation report Producer Price Index (PPI) came out, gold shot up to $1,830 before retreating to $1,822, encouraged by the high inflation numbers and Chairman Powell’s admission that “notably” higher inflation will likely “remain elevated in the coming months” rather than inflation being “transitory.” We called this one weeks ago.

Inflation Rates are the Highest in 13 (or 30) Years – and the Fed Chair Finally Admits It!

The June Consumer Price Index (CPI) rose at its fastest pace in nearly 13 years due in large part to a surge in used vehicle prices and cost increases in food and energy, according to the U.S. Bureau of Labor. On a monthly basis, the CPI rose 0.9% (an 11% annual rate), and the CPI rose 5.4% on a year-over-year rate, from June of 2020.  It was the largest increase since August of 2008, right before the financial system collapsed in September of that year. The “core” CPI (stripping out food and energy) rose 4.5% over the last 12 months – the largest increase since September 1991 – nearly 30 years ago.

Prices of used cars and trucks leaped another 10.5% last month, accounting for more than one-third of all the CPI’s June gains. Housing and transportation costs are the largest consumer expenses. Over the past 12-months, used car and truck prices increased 45.2%, the price of gasoline rose 45.1% and median home sale prices are up over 20% in the last year (shelter makes up nearly one-third of the CPI). 

On Wednesday, the June Producer Price Index (PPI) was even higher, and more shocking, coming in at 1.0% (a 12% annual rate). Economists were predicting a much lower increase of only 0.6%. In the past 12 months, the PPI is up 7.3%, the highest since 2010, when such records were first kept. As with the CPI, much of the increase came from the auto and auto parts industry, where prices rose 10.5%, due to supply chain bottlenecks and rising post-pandemic demand. That’s why the Federal Reserve keeps telling us that inflation will be “transitory,” or temporary, based on catching up from the 2020 pandemic-related recession.

That’s a comforting theory but big inflation numbers keep coming in. As a result, an increasing number of mainstream economists are questioning the Fed’s “transitory” theory: For instance, Sarah House, senior economist for Wells Fargo’s corporate and investment bank, said: “What this really shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period.”

She continued: “We are seeing areas where there’s going to be ongoing inflation pressure even after we get past some of those acute price hikes in a handful of sectors.” She also said that some Federal Reserve board members were already showing “jitters” about inflation at their June meeting. “If you parse through this, there are a number of areas where inflation is picking up and likely has staying power.”

On Wednesday, at noon Eastern time, Federal Reserve Chairman Jerome Powell, began his semi-annual testimony before Congress. He changed his language slightly, saying, “Inflation has increased notably, and will likely remain elevated in coming months before moderating.” That is a far cry from transitory.

The combination of his words and the elevated inflation numbers sent gold prices briefly up to $1,830.

While the U.S. Mint Remains Closed, You Can Take a “Virtual: Tour

There are still significant delays in delivery of some bullion coins in the American Eagle series from the U.S. Mint.  At this time our wonderful U.S. Mint Museum is closed to the public but you can take a “virtual” tour in the meantime and then plan an in-person visit when it re-opens.

The new U.S. Mint Virtual Tour mobile app takes you behind-the-scenes at the Philadelphia Mint to see how coins are made. You can explore the production floors and follow the steps of how they manufacture circulating coins, including 3-D models of those coins. For children, you can also download the virtual tour extension activity bingo card (in PDF format), which helps them follow the information on the Virtual Tour.

New Kennedy Half Dollars Soon Available in Some Banks

They don’t contain any silver, but if you want to impress friends with some of your pocket change, why not give them a classic coin with the face of 35th President, John F. Kennedy? The Federal Reserve has been quietly ordering circulation-quality Kennedy half dollars for distribution into general circulation.

It was widely believed that none of the Kennedy half dollars struck in circulation quality had not been routed for circulation release since 2002 and the output from the Denver and Philadelphia Mints was all reserved for numismatic sales in bags and rolls and offered at premiums above face value.  However, U.S. Mint spokesman Michael White said the Federal Reserve has been placing orders for 2021 circulating Kennedy halves. We can’t promise they’re available at your bank but you can make inquiries or put them on order.

 

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