More Banks & Investors Are Not Believing Fed Propaganda

As inflation continues to heat up, gold and silver markets are once again on the verge of breaking out.

On Thursday, the Bureau of Labor Statistics released much-anticipated Consumer Price Index data. The CPI came in at a full 5.0% year over year through May. 

The so-called “core” rate, which excludes food and energy, showed an annual increase of 3.8%. That represents the biggest jump since all the way back in 1992.

Meanwhile, Federal Reserve officials continue to downplay the inflation threat. They insist the recent surge is transitory and doesn’t reflect a major trend to come.

But as Denver’s local 9NEWS reported, not all economists are echoing the Fed’s messaging on inflation.

News Report:            We are again, talking about inflation. That's when prices rise for all sorts of goods and services, therefore our money buys less. It is happening now. Although many economists think it's only temporary and will stabilize once supply disruptions and other effects of the pandemic wear off. But the chief economist for Deutsche Bank disagrees saying that the aggressive stimulus and economic changes in the U.S. will cause inflation to get worse for the next several years.

Investors seem unconcerned about the prospects for future high inflation – at least judging by the market’s response to yesterday’s CPI headline. The S&P 500 crept up to a slight new record high while bond yields actually moved lower by the end of the day.

As for precious metals markets, gold and silver each advanced slightly toward the tops of their recent trading ranges above $1,900 and $28, respectively.

Metals markets stand to benefit from rising inflation expectations. And interest rate sensitive markets including bonds stand to suffer.

Given an inflation rate of 5%, bondholders and cash savers stuck in low-yielding instruments are already suffering significant real purchasing power losses. Yields would have to move markedly higher in order to generate positive after-inflation returns.

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Disclaimer: Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Because individual investment ...

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