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Silver has fallen in price. Gold jumped about $185. We are now about 13% above the low for gold. They grew for the exact reason I mentioned. Gold fell, gold mining company stocks fell because people were fooled by the Kevin Warsh show. He's supposedly the new sheriff in town. He is the reincarnation of Paul Walker.
And now these larger deficits—how is the government going to finance them? Ultimately, the Fed will have to fund them. That's why I kept talking about the drop in the bond market. People were worried that rising bond yields were a “ bearish” signal for gold and silver. This is not true, this is a "bullish" signal, because rising bond yields will force quantitative easing.
The higher the bond yield, the greater the competition for gold. Like, oh, I'd rather sell gold to get 5% on 10- year Treasury bonds. The US dollar, the dollar index, fell by about 80 basis points. Bond yields up, oil up. Bond yields are down, oil is down. A stronger dollar helps keep consumer prices down.
This helps keep import prices under control. Housing construction volumes are significantly lower, and the number came out...now the market confirms my interpretation, because look what happened to the price of gold. So, yesterday, gold fell about $80, closing near the lows of the day. This was probably the worst day for gold in at least a month, if not more.
And, you know, silver also fell. Gold jumped about $185 today, closing above 4,500. In fact, gold fell about $20 last night. So, the intraday increase was $200. Huge. It was a reversal day, technically, because today we broke through yesterday's low in gold and then closed well above yesterday's high.
So, technical reversal, we are now about 13% above the low for gold. Gold bottomed out just below 4,000. If you remember, I pointed out in this podcast, " Look, 4,000 is the bottom." "You should, well, you should buy this." And here we are now above 4500. Silver also had a great day. It closed above $66 per ounce.
Let me see where it is now. I'm recording this at night . It is now about 9:30 pm. And well, silver is actually down about 18 cents now, 66.71. So, yes, well above 66. In fact, I think it might have gone above 67 earlier tonight. Gold is retreating. It fell about $20 but is still trading above 4,500 .
So, a very important day for gold and silver. Mining company stocks were " on fire" today. Many stocks rose by 7, 8, 9, 10, 11, 12%. It seems that GDX and GDXJ are up 8%. You know, both of these indices have grown by almost 40% in the last month. Gold's rapid turnaround could indicate something much more than just a rebound.
Peter Schiff notes that gold's intraday swing of $200 and silver's breach of $66 show that buyers are rejecting yesterday's liquidation. The 7-12% jump in mining stocks confirms that institutional appetite is returning. Given that GDX and GDXJ are approaching 40% monthly returns. The message is clear.
Weakening confidence can quickly change the price of supposedly safe assets. Peter Schiff goes on to explain why this reversal may be a first warning, not a final step. And they are growing for the very reason I mentioned. Gold fell, gold mining company stocks fell because people were fooled by the Kevin Warsh show.
All these, you know, performances: "oh yeah, we're going to fight inflation hard, inflation will fall to 2%," like everyone was saying, "oh, he's the new sheriff in town, he's the reincarnation of Paul Walker." And I said: no way, the markets are wrong, he won't do it, it's just talk. And I kept saying: look at what the Fed is doing, don't pay attention to what Warsh says, look at the money supply, the balance sheet, the fact that they're not raising rates.
All these loud statements did not match the fact that they sat idly by and did nothing. And now the Treasury is making the Fed's fight against inflation even harder. In fact, they create much greater upward pressure on inflation because, as the Treasury continues to shorten the maturity of the national debt, each time the Fed raises interest rates, it does much more damage to the budget.
The budget deficit is growing because servicing this debt now costs more. So, by trying to fight inflation, the Fed is actually sowing the seeds for new inflation, because how is the government going to finance these larger deficits? Ultimately, the Fed will have to finance them. That's why I kept talking about the bond market falling, because people were worried that rising bond yields would be a " bearish" signal for gold and silver.
And I insisted that no, this was a "bullish" signal, because rising bond yields would force quantitative easing. The threat of inflation may lurk within policies that are supposedly designed to contain it. According to Peter Schiff, rising yields are no competition for gold. It may indicate that the Treasury bond market is deteriorating to the point where intervention is needed.
As deficits and debt service costs rise, it becomes increasingly difficult to restrain monetary policy. For investors, this makes bonds a less reliable protection, especially if pressure on the currency increases. Peter Schiff goes on to explain why higher yields could eventually force an expansion of quantitative easing.
Rising bond yields will weaken the economy. It will cause larger budget deficits. In fact, the reason for the rise in bond yields was inflation. And that didn't mean higher bond yields would become a competitor for gold. Like, oh, I'd rather sell my gold to get 5 % on 10-year Treasury bonds. No, it was just another reason to sell Treasuries as their price falls.
When Treasury bond yields rise, it means their price falls. This means that if you own Treasury bonds, you are losing money. So , what do you want to do ? You want to get rid of Treasury bonds and buy gold. So a weak bond market is a bullish signal for gold. This is not a " bearish" signal. And for the very reasons that we've seen today, because the bond market has been so weak, that's forcing the Treasury to buy back those bonds, and that's going to force the Federal Reserve to do the same.
By the way, it's interesting that we didn't see a big rally in the stock market today. That is, the market has grown, but not significantly. It wasn't even 200 points higher. Let me see how much the Dow has risen. It seems like a couple of hundred points. Nasdaq barely turned a profit. In fact, many technology stocks even fell on this news .
And, you know, even though the bond market grew, that growth wasn't that significant.
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