Americans May Soon Regret Trusting the Fed & Holding Cash

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Sent on 27 November 2023 12:57 PM

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Money Metals News Alert November 27, 2023 Precious metals rallied for a second week and closed higher Friday and are inching up further today.

The move is being driven, in part, by weakness in the U.S. dollar and a growing consensus that the Fed may be done with hiking rates. Stock prices also got a boost on the speculation about Fed policy. The S&P 500 closed at its highest level since August. Activity in the physical bullion market was muted, as expected during Thanksgiving week.

Bid and ask premiums are steady, and inventories are in good shape on the most widely traded products.

Friday's Close (Weekly Gain/Loss) Monday Morning (Gain/Loss from Friday's Close) Gold $2,013 (+1.0%) $2,020 (+0.3%) Silver $24.51 (+2.5%) $24.82 (+1.2%) Platinum $947 (+3.3%) $931 (-1.7%) Palladium $1,107 (+1.6%) $1,093 (-1.3%) Gold : Silver Ratio (as of Friday's closing prices) 82.1 to 1

Americans May Soon Regret Trusting the Fed & Holding Cash Share this Article:

Over the longer term, gold and silver arent the only assets which have been trading in a range. Stocks have also been struggling to establish a trend either higher or lower over the past 3 years. Demand for publicly traded stocks and demand for physical bullion arent always correlated, but stock investors and metal investors do have something in common. Both groups are grappling with uncertainty, and that means some people are on the sidelines. The Wall Street Journal reports investors sitting on record amounts of cash.

They are a bit worried and dont know what else to do. There isnt consensus in the financial press. One story suggests investors punch the accelerator while the next urges them to pump the brakes. Meanwhile, ordinary Americans who increasingly say they disapprove of Bidenomics dont seem to be buying the government statistics the media is reporting.

Surprisingly strong GDP, ultra-low official unemployment and federal CPI reporting which shows price inflation coming down are all examples of data which doesnt match Americans' lived experience. Many of the people making the bullish case for owning stocks dont seem to be buying the official statistics either. They arent suggesting the U.S. economy is great. Instead, their argument hinges, in large part, on the thesis that as the economy hits the skids, the Feds response will be to cut interest rates.

Mainstream America may regret placing so much confidence in the central planners at the Fed. There is far more to a healthy economy than interest rates, but these days little else seems to matter. The record amount of cash on the sidelines isnt entirely attributable to uncertainty. People have been incentivized by higher interest rates available in money market funds. Oz Paul Revere Silver Rounds Shop Now >>

However, Americans might be well served to contemplate how safe this cash really is. Money market funds arent going to keep pace with inflation over the long run. Nor are they immune from credit risk, which could manifest at any time. Bullion investors would like to see some of this capital pour into the gold and silver markets. They are looking for a catalyst which pushes people away from conventional assets and toward alternatives.

Key Economic Data Scheduled for This Week

Tuesday, November 28th Consumer Confidence. Forecasters anticipate a modest decline in consumer confidence in the November survey. Wednesday, November 29th GDP. Third quarter GDP was reported initially at 4.9% growth, surprisingly strong. The consensus is that the first revision of that data will show the same growth rate. However, GDP has often been revised downward in recent quarters. Thursday, November 30th Personal Incomes and Spending. Both incomes and spending are expected to decline in this weeks report for October. The consensus for income is a drop from 0.3% to 0.2% growth, while spending is expected to drop significantly - down to 0.2% from 0.7% in September.

This week's Market Update was authored by Money Metals Director Clint Siegner.

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