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Mixed Messaging from the Fed Causing Confusion in Markets
Stagflation creates especially difficult environment for investors
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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Precious metals markets are giving up ground this week as investors react to the latest musings from the Federal Reserve.
On Wednesday, the Fed released the minutes from its latest policy meeting. Officials acknowledged some of the warning signs of a weakening economy. That suggests they are likely to scale back future rate increases rather than implement additional 75 basis-point hikes.
But policymakers also admitted that inflation is still running uncomfortably high and seem poised to continue tightening to some extent.
Mixed messaging from the Fed caused confusion among investors. Some interpreted the Fed's comments as hawkish while others saw them as more dovish than expected. Perhaps central bankers themselves are confused and don't really know what they should be doing next.
Yahoo Finance Report: After raising rates by 75 basis points for the second consecutive month in July, the latest Federal Reserve Minute signaled that the Central Bank is likely to slow the pace of policy rate increases at some point.
Bloomberg Reporter: Fed officials noted that some parts of the economy, notably housing, were starting to slow as a result of higher interest rates. Some supply chains were beginning to normalize. They also saw some tentative signs that labor markets were loosening. Remember, this was before the July jobs data were released. Inflation though, they said remain too high, and the balance of inflation risks was skewed to the upside.
Inflation pressures have been receding somewhat in recent weeks. A spike in interest rates combined with sharp declines in copper and crude oil may be pointing toward a nasty recession dead ahead.
But some forecasters see commodity prices moving back up amid supply constraints.
Of course, it's possible for both rising price levels and a weakening economy to occur simultaneously. That's a condition known as stagflation.
It creates an especially difficult environment for investors. They can't hunker down in bonds and cash like they would in a typical recession and expect to preserve capital. Nor can they count on economically sensitive assets such as stocks to provide positive real returns.
In times of uncertainty and confusion, precious metals as an alternative asset class serve an invaluable role in an investment portfolio. Though gold and silver markets aren't guaranteed to appreciate in value over any given holding period, they fulfill the unique role of being the soundest form of savings. And historically, precious metals have been the premier asset class to hold during periods of stagflation.
For now, though, mainstream investors aren't yet fully convinced of the need to diversify out of financial assets. As a result, gold and silver markets have been fairly quiet so far this year.
A potential late summer rally seems to have stalled out this week. Gold prices are off 3.1% since last Friday's close to come in at $1,756 an ounce. Silver is down over $1.50 or 8.1% for the week to bring spot prices to $19.37 per ounce.
Turning to the platinum group metals, platinum is putting in a similar weekly decline as silver is and is off by 7.7% to trade at $906. And finally, palladium currently checks in at $2,165 after falling a little more than $100 or 4.9% this week as of this Friday morning recording.
Well, with precious metals on sale, it's a buyer's market. And many analysts believe the best buys are in silver and platinum in particular.
Those who already own core positions in gold and silver might want to consider diversifying into platinum at this time. Whenever platinum sells at such a big discount to gold, it generally represents good value. That is certainly the case today.
There are plenty of ways for investors to own this scarce and important industrial metal. They include one-ounce platinum coins issued by the United States and other government mints as well as privately minted bullion bars.
A handy way to acquire platinum in smaller sized portions is through PAMP’s 1-gram bar pack. Each multigram pack contains 25 bars. Each bar is marked with an individual serial number with weight and purity indicated.
This PAMP Swiss refinery is perhaps the premier name in bullion bars. Easily recognizable by the Lady Fortuna design on the front of each bar, PAMP Suisse’s bars are classy and popular.
PAMP Suisse is known for their innovative security and design features. All new PAMP Suisse Fortuna Platinum Bars carry the mint’s proprietary Veriscan technology to assure holders that the bars are genuine and untampered. Bars can be scanned again later for verification.
The front of each bar features Lady Fortuna, a Roman goddess representing fortune and luck. The goddess is blindfolded with hands outstretched to collect a bounty of riches flowing forth from the cornucopia that sits atop her head.
Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.