CPI Update for August
After months of increasing CPI numbers, inflation at 40-year highs and several rate hikes, it seemed that the Federal Reserve’s efforts to tame inflation had finally started to have an effect for the month of July. The CPI data came in lower than expected for July. This gave the market the impression that FEDs rate hikes were working. However, the latest piece of CPI data was released for the month of August. A decrease of 0.1% was expected, however the numbers came in and shocked the market. Instead of a decrease in CPI, an increase from 8.5% to 8.6% was observed from the months of July to August. This could suggest that the FED’s rate hikes have not been having as much of an effect in controlling inflation as the market had hoped. More time is needed to assess the effect of the rate hikes but market participants are already expecting a 100 basis point rate hike at the FED’s next meeting. If the FED makes any sort of a U-turn on the pre-suggested monetary policy tightening plan it would be very bullish for equities and precious metals like gold and silver.
For more on the recent CPI number drop, see Forex Live’s article here.
Russia looking into its own Gold Standard
Earlier this year the US, UK and European Union imposed sanctions on Russia. Following these sanctions the LBMA or London Bullion Market Association suspended, from its Good Delivery List, all 6 of Russia’s major precious metals refineries. In effect, new gold refined in Russia is now banned from being sold in London where trillions of dollars of precious metals are traded every year. Most bullion dealers and banks will only deal with precious metals produced by accredited refineries and the LBMAs Good Delivery list is considered the international standard for gold trading. In response to this ban, Russia’s Finance Ministry stated that it is critically important to establish the new Moscow World Standard or MWS. They claim this would help the precious metals industry normalize and would provide the world with an alternative to the LBMA. Russia has also proposed that precious metals prices be fixed to key national currencies via a new monetary unit, something like a new BRICS currency that Russia’s President, Vladimur Putin, has spoken of before.
For more information on Russia’s ban from the LBMA and its proposed Gold Standard, see Kitcos article here.
Silver Paper Price Manipulation
A federal criminal trial for three JP Morgan executives began in July. They are accused of precious metals price manipulation in a multi-year scheme, using what is known as “spoofing”. Spoofing is where someone places a large order that is clearly visible to other market participants with no intention of actually following through with the order. These big orders are used to deceive and manipulate other market participants in order to achieve a desired outcome, in this case, a lower silver price. This sort of manipulation is done in the silver paper markets or silver derivatives market and not in the physical market. When demand in the physical market overtakes the demand in the paper market hopefully price manipulation will end and silver will enter true price discovery. The actual weight of silver that underpins the huge volume of paper silver trading has been declining quickly since 2021. According to Ronan Manly from BullionStar, stockpiles of silver in the LBMA and COMEX vaults are currently at a 6-year low. Many precious metals investors have taken advantage of silver manipulation by buying silver at much cheaper prices especially with declining trust in banks, government and other institutions. With rising inflation, artificially low precious metals prices due to manipulation and the prospect of a precious metals backed common currency for BRICS nations it seems gold and silver are perfectly placed for large upside moves.
For more on silver manipulation see Money Metals article here.
