Fed Chairman Jerome Powell pointed out in a hearing prepared for a Senate committee on December 2 that the new crown variant exacerbated many of the economic risks and inflation uncertainties facing the United States, and hinted that it would speed up the withdrawal of stimulus measures, which paved the way for the Fed to raise interest rates three times in 2022, and unexpectedly changed his mouth that the temporary term used to describe high inflation may retire, which means that the Fed has officially been punched in the face on inflation and begun to admit defeat.
Powell
As Powell makes this decision, our team expects data released by the U.S. Department of Labor on Dec. 10 to show that the November CPI surged more than 6.7% from the same period last year, up from 6.2% in October, which will be the biggest rally since the early 1980s.
As the Bank of America report shows, the current peak level of inflation in the United States is far from the future, and more than 30 trillion yuan of stimulus will eventually lead to inflation out of control, because every time a new economic crisis breaks out in the United States, their solution is to print money, spend money and borrow more money.
Most importantly, the Fed is still buying base bonds at a monthly scale of 105 billion, if measured at 10 times the monetary base, then the 105 billion converted into M2 will become a scale of 1.05 trillion US dollars, the past 78 weeks, M2 is a sharp increase of 76.2% compared to March last year, M1 increased by 26.1%, which means that a quarter of the current global market cash is watermarked during this period. The large M2 line below illustrates this process perfectly.
So, from this point alone, the Fed has made a mistake even if it admits that inflation is not temporary now, it is clear that the Fed has deceived the market, the report shows that in the past quarter, the real inflation rate including rent should be 7.5%, not 6.2%, which is the highest level since 1980, in the past two weeks, there have been several senior Fed governors who have issued warnings about inflation, for example, Fed Governor Bowman has warned about inflation. It is also concerned that loose monetary policy is fuelling high prices and possible asset bubbles.
Conference room at fed headquarters
Immediately after, CEO Sprott said in a report published a week ago that Americans are re-examining the financial properties and credit value of gold, and it is clear that gold is no longer a marginal asset or investment product, because the macro environment of the US economy is now monetized debt and currency depreciation, although the US Treasury and the Fed believe that they can control the value of the us dollar, but monetary history tells us that they cannot control it, and the Fed is unable to print gold, and the latest news is confirming this view, for now Americans are buying gold and gold.
According to data released by the U.S. Mint on Dec. 1, total gold coin sales from January to November 29 this year were 1.202 million ounces, far more than last year's 845,000 ounces, while in 2021, only two months of Gold were used in October and November Eagle) sales (279,000 ounces) surpassed all-year 2018 sales (nearly 130,000 ounces), and total demand for U.S. bars and coins in 2021 will be about 3.8 million ounces, according to the World Gold Council's demand report released in November.
Americans snapped up some of the data details of gold
According to the Russian media RT on November 20, citing the latest data from London-based Metals Focus, although the US consumer confidence index has fallen sharply since April, the US gold and gold market has unexpectedly remained very strong, with a total expected to exceed 140 tons, another 10% increase from 2019 growth, and the purchase volume hit a new high in more than 10 years.
U.S. gold mining comes from the U.S. Geological Survey website
It is worth mentioning that in addition to the ordinary American people who are frantically buying gold, the US data company Palantir said in a statement released a week ago that they are hoarding gold bars, recently purchased $50 million worth of gold bars to cope with risk events and rising inflation, and invited its customers to use gold to buy its services. Even, in an updated proposal (HB2123) proposed a week ago, the authorities in the US state of Kansas officially passed legislation to make gold legal tender with the same currency function as the US dollar, and abolished the gold transaction tax, which was a surprise to investors.
These vivid examples reflect the doubts expressed by the AMERICAN public about whether the US dollar can continue to serve as a long-term store of wealth, as explained by Bank of Thailand Governor Sethatu Suthiwartnarueput in his November 15 speech that "gold can meet the main reserve management objectives of security, return, diversification and tail risk hedging", which shows that gold is returning from the edge of monetary history to hedge the exposure of the US dollar. Persistent inflation concerns are expected to support investment demand for gold. The latest data is reflecting this analysis.
From the perspective of global markets, according to the "Global Gold Demand Trend Report" released by the World Gold Council on November 17, in the first nine months of this year, global central banks bought up to 393 tons of gold, 63% higher than the same period last year, and 39% higher than the semi-annual averages in the past five years and 29% in the past decade. Among them, in the first nine months, Thailand, Hungary and Brazil became the largest buyers, adding more than 220 tons in total, and the total global demand for coins and bars in the first three quarters of 2021 hit the highest level since 2013 to 867 tons.
A steppe gold mining site in Mongolia
Not only that, but gold imports and sales in the Chinese market have also rebounded significantly. According to the World Gold Council, gold imports totaled 228 tonnes from July to September 2021, up 300% year-on-year, which also brought China's total imports from March to September 2021 to 513 tonnes, an increase of 232 tonnes from 2020, jewellery demand to 157 tonnes, up 32% year-on-year, and gold bar and coin sales to 65 tonnes, up 12% year-on-year. At the same time, in the first 10 months of this year, the overall holdings of China's gold-backed ETFs also hit a record high of 74t, and for the fifth consecutive month, it maintained net inflows, and the total holding size rose to the highest level ever in tonnage terms.
Gold demand in China is growing
Not only that, according to a latest industry report released by a Swiss precious metals research institute cited by the US financial website Zerohedge on November 25, a recent batch of about 190 tons of gold has arrived in the Chinese market from Europe and the United States in October, which shows that about 703 tons of gold have arrived in the Chinese market since 2021.
According to the "China Gold Yearbook 2021" data released by the China Gold Association, in 2020, China's gold (futures) trading volume totaled 95,500 tons (unilateral), accounting for 13.72% of the total trading volume of the global gold market, and by the end of 2020, China's gold resources were 14,720 tons, which has achieved 15 consecutive years of growth.
There is a positive relationship between China's gold consumption and national power
It is in these contexts, this and the other, many countries around the world in the increase in gold, announced plans to ship back to the United States gold at the same time is also selling U.S. Debt, de-U.S. de-debtization trend is very obvious, as the following data provided to us by the World Gold Council and the IMF, since October 2014, a total of 67 months of global central banks are selling U.S. Treasuries, therefore, the global U.S. Treasury reserves continue to decrease, in stark contrast to the growth of gold reserves.
It is worth noting that the US quartz website quoted the latest views of Wall Street economists a week ago as saying that large buyers of US bonds at the global central bank level, including Japan, Russia, Germany, etc., are likely to reduce a large number of US bonds, and if the risk of implicit default of US bonds increases after the US inflation continues to rise, there is also a possibility of clearing US bonds. However, the new news now is somewhat unexpected by investors.
According to a follow-up report cited by the Russian media RT two weeks ago, the gold stored in the New York vault has not been audited, and the outside world suspects that the Fed may have sold or leased most of the gold through futures gold to make a profit, and the Russian media said that the Fed may have blocked the demand for returning gold from many countries, including Germany, Turkey, Venezuela and other countries. But some experts said that the ownership of this gold is very clear, the Fed does not dare to prevent countries from shipping back their own gold, because this way of deposition is a capital-protected storage, for various reasons, the Fed does not dare to embezzle this gold. (End)