Gold hit another all-time high yesterday at $2,592 and looks like a clear breakout with a lot of upside. Silver hit $30.30 an ounce and broke the downtrend. Some stocks like Coeur Mining (CDE) were up 20% due to short covering. Our own Avino Silver and Gold (ASM) was up 5%.
Brit and I have been telling you to buy gold and silver here at the Outsider Club for half a year now. It is looking like the liftoff has arrived with a clear and open runway.
There are a number of reasons for the breakout in gold and they have been snowballing.
First, yesterday’s Producer Price index showed that the core inflation number was still up but the wholesale number dropped to 1.7%. Consumer foods was up 4.2% but energy prices fell 8.4%.
This was a mixed bag that points to the Fed cutting rates.
Two days ago the Consumer Price Index also revealed a drop in inflation mostly due, again to energy prices. The report stated:
The overall annualized rate dropped from July’s 2.9% to 2.5% in August, again mainly because of a dramatic fall in energy prices (-4.0%). The upward spike continued in shelter costs, shooting up 5.2% in August, and included both rentals (5.2%) and owner costs (5.4%). Insurance spiked 3.6%, and municipal utilities went up 4.2%.
The market sees a 50 basis point cut this month which is bad for the dollar and good for gold.
CTRL Print
The problem is that inflation is caused by the government printing and spending money. We have had three years of high inflation which has compounded problems in the working class. Shelter costs remain high and eating out has been reduced to special occasions.
For the poor, inflation is hitting hard. You see this reflected in earnings from the likes of Dollar General (DG) and Dollar Tree (DLTR) both of which missed estimates and sold off.
Savings are down, credit card use is up, automobile loan defaults are high, and layoffs are picking up but still not reflected in the numbers. According to headhunter, Challenger, Gray and Christmas firms announced 75,891 layoffs last month, roughly triple the number from July and the largest month-to-month increase in a year.
PwC just announced it was cutting 1,800 people. Xbox is cutting 650.
But the biggest catalyst for the gold price shooting higher is debt.
It Can’t Go On
In just August, Treasury reported a $380 billion deficit compared to a surplus of $89 billion in the same month last year. Receipts last month reached $307 billion, while outlays reached $687 billion, up $493 billion, or 254%.
You can’t spend twice as much as you take in indefinitely. That type of spending will result in higher inflation. But the government can’t stop. They didn’t even mention the debt in the debates.
The whole year looks even worse. According to Reuters:
“The U.S. budget deficit reached $1.897 trillion for the first 11 months of the 2024 fiscal year, the Treasury Department said on Thursday, as annual interest costs on the public debt topped $1 trillion for the first time.
The Treasury said the fiscal 2024 deficit through August was up 24% from a $1.525 trillion deficit in the comparable year-ago period.”
The U.S. is paying a trillion dollars a year just in interest. It is no wonder that foreign central banks are selling dollars and buying gold.
Saudi’s Buy Gold
Another odd bit of news came out yesterday that is bullish for gold. The Saudi Central Bank was caught secretly buying 160 tonnes of gold in Switzerland. They’ve been adding gold since 2022.
And it is not just the Saudis. Poland, India, China, and Russia were large buyers of gold this year. The world is diversifying away from the U.S. dollar.
The Kobeissi Letter recently reported that “global net gold purchases by central banks reached 483 tonnes in the first half of 2024, the most on record.
It added that the figure is 5% higher than the previous record of 460 tonnes which was set in the first half of 2023. In the second quarter of 2024, central banks bought 183 tonnes of gold, marking a 6% increase year over year.”
I will be adding to my gold and silver positions today and buying the dips going forward. If you don’t own gold, buy the breakout.
All the best,
Christian DeHaemer
Outsiderclub.com
Layoffs Surge in August: https://www.reuters.com/markets/us/us-planned-layoffs-surge-august-recruitment-firm-challenger-says-2024-09-05/
The Kingdom Buys gold: https://www.moneymetals.com/news/2024/09/12/saudi-central-bank-caught-secretly-buying-160-tonnes-of-gold-in-switzerland-003458
Go Long Silver: https://www.outsiderclub.com/silver-solid-state/
Buy Gold from July: https://www.outsiderclub.com/the-dollar-will-die-of-old-age/
