Wolf is cried once more
The Biden administration continues to beat the war drums. The projected date of invasion has come and gone and yet they persist. Worst yet, the market believes the lies. Today saw a huge move for gold going up 1.3% and breaking through the $1900 barrier. Silver also traded up .75% to finish the day above $23.80. Oil, however, oscillated wildly all day. We’ve hit a level in oil where it is becoming political. There are members of Congress that are very concerned about their re-election efforts with American’s experiencing such pain at the pump. They’ve floated the idea of a gas-tax holiday to run through the end of the year. The republicans, obviously, are against it calling it a “gimmick”.
The political football over the Russian invasion is far from being over. New dates will come and go. The next method for the war department to ratchet up the rhetoric will be continuing to play up the fighting between east and west Ukraine. Today it was a kindergarten, tomorrow it could be a factory. There is still tension in eastern and southern Ukraine from what happened in 2013-2014. This tension is going to get more intense since the US decided to sell the Ukrainian government weapons.
At some point, Biden may play down the effort in Ukraine to score political points. He’ll have “stood up to Putin”. I have no doubt that this will be a topic at Biden’s March 1st State of the Union address. I expect Russia will continue to house troops on their western border in the instance that eastern Ukrainians decide to flee the violence caused by the attacks from western Ukraine.
This means there is more upside to both gold and silver from here. Like David at LiveBetterNow highlighted a few days ago, gold and silver have outperformed the broader market over a 6 month timeframe. I expect this trend to continue to play out.
From the Fed
The Federal Reserve published their FOMC meeting minutes on Wednesday. There were no new insights and the market has already priced in rate hikes. It is still uncertain at what pace the Fed is going to unwind it’s balance sheet.
Also on Wednesday, we got retail sales data which blew the forecasts our of the water.
Hot retail sales like this make me think consumers are beginning to make purchases before prices go up. This will become exceedingly dangerous as the supply chain dysfunctions become alleviated. When more product begins to move, they will begin to be repriced higher, elevating the chances of consumers continuing the trend of buying before further price increases. This became entrenched in the 70’s and was one of the reasons Fed Chair Volcker had to raise interest rates as high as he did.
We are still waiting on the Senate Banking Committee to move forward with a vote on five Federal Reserve Board nominees. This would include Powell’s confirmation as Chairman and Brainard’s nomination for vice chair. Republicans on the committee have concerns about Sarah Bloom Raskin. She has some very scary views on the Fed’s role about restricting capital to industries that cause climate change. She also has used her inside knowledge of the workings of the Fed to help her private sector buddies. Both of these factors should be enough to sink her nomination but politicians love to double down on bad ideas.
