At 1400 EST today the Federal Reserve Bank decided to lower interest rates by a quarter point (25 basis points). As a result the Dow Jones Industrial Average dropped 196 points and the S&P 500 sank to 25 points by 1148 that morning.
By 1445—the 10-year treasury bond dropped to 1.77% and the two-year treasury yield was at 1.78%. The Dollar Index rose 0.38% to 98.64. Gold and silver declined to $1,502.10 and $17.68 respectively. Nevertheless, as a longstanding hedge against inflation these metals have been deemed as “money” since human civilization began 5,000 years ago.
It’s no surprise during weak and volatile economies gold and silver shines, even amid a strong dollar that is artificially propped up. These are signs that the United States economy is falling, and “real money” is rising. Keynesian economics and modern monetary theory (MMT) have wreaked havoc on our once rich and prosperous economy that blossomed during the republic’s early years in the 1700s.
The U.S. has long been a creditor nation, meaning it has loaned money to others. Now, it’s a debtor nation, owing $1.11 trillion to China as of May 2019, with a fiat currency that lost 98 percent of its value since the Federal Reserve was created in 1913. President Nixon took us off the gold standard “temporarily” (or so was the claim) in 1972. The 40 percent backing allocation of gold and silver before this point restrained U.S. monetary policy from overspending.
Further, amid today’s news of weary investor confidence, gold and silver prices stayed above their early August highs. We are still looking at higher highs and lower highs when setting a line between the base of their chart fluctuations since the bull market began in June of 2019.
Gold price remains slightly more stable than silver, although fluctuations have historically caused silver to outperform gold. There widely assumed that silver will have more leverage–in both directions–as it follows the price of gold during this bull market.
It’s also important to note that structural bull markets in precious metals such as this usually last about 5 years. I feel strongly that gold and silver will outperform the U.S. stock market in the coming years. The economy is a mess. Record consumer debt soars at all time highs, while low-wage “server jobs” fill much of the employment numbers. Meanwhile, pundits on CNBC and the Trump administration claim the economy is still strong amid dwindling numbers of economy growth.
Though recent earnings reports from some U.S. retailers (e.g. Walmart) were favorable, they were likely due to credit card borrowing. The reality is, most Americans are broke. They use credit cards to buy necessities, and many do not see what’s coming. Consumerism is a major problem in this nation. Americans’ lack of saving combined with the federal government’s increase in spend will surely reap consequences. We are due for a huge, painful correction, but this is how natural laws work.
Moreover, as usual, President Trump reacted with yet another degrading tweet toward Chairman Powell upon his Fed announcement at 1400, criticizing his dovishness of not lowering interest rates even more. Notwithstanding, Trump’s recent attacks contradict his former condemnation of low interest rates by the Fed during the Obama years, which he avidly denounced.
Donald Trump: Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!