Tuesday, May 1, 2018

Gold and silver prices appear to be a target for the establishment as they prop up the dollar to try to stem rising inflation

One of the less talked about events that has emerged here in 2018 is the specter of stagflation, or the environment where costs are rising and growth is slowing.  And this can be seen not only in the last few Purchasing Manager Index (PMI) reports, but also from economists such as Alan Greenspan.

Last week the U.S. received a serious wake-up call as the yield on the 10 year Treasury crossed over 3%, and the yield curve flattened at one point down to just 14 bps.  In addition, oil prices began to spike once again, with WTI edging ever closer to $70 per barrel for the first time in several years.

This of course has led the Fed and the Treasury's Exchange Stabilization Fund to engage in a new policy to support the dollar, and it has worked so well that the reserve currency has climbed 350 bps in the last 15 days.

Yet there was another interesting event also taking place, and this was the fact that foreign central banks are once again dumping dollars (Treasuries) and instead are buying or repatriating gold for their reserves.  And with inflation historically being a strong factor in bringing about higher gold prices, the powers that be have used the rising dollar as a catalyst to drive gold and silver down to almost below production cost levels.

Gold breakeven costs:

Silver breakeven costs:

Gold and silver prices as of May 1, 2018


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