Gold had an interesting week, as the start of the fourth quarter draws in mixed reports, stemming from weak jobs reports, continued COVID-19 restrictions, record-high oil prices, supply chain bottleneck, and inflation. The Fed continues to give mix signals as to what policies they will implement to help curb inflation and give a substantial boost to the economy. Recently, the Fed’s Jerome Powell mentioned the possibility of tapering COVID era policies, but yet, we do not know what tapering measures will be implemented.
Q3 2021 hedge fund letters, conferences and more
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In Washington, the battle continues between liberals and conservatives on issues about the debt ceiling, the massive $1.2 trillion infrastructure bill, and government funding. Conservatives believe the government cannot afford to fund the new proposed projects the Democrats are demanding. The US’s debt currently stands at $28.8 trillion.
Some Democrats have even proposed the minting of a $1 trillion coin to be deposited in the US Treasury to fund the numerous amount of government services. Many economists believe that will have insignificant effects on curbing debt woes, saying that changing monetary policy is one solution to fixing our economic issues. U.S. Treasury Secretary Janet Yellen said she does not intend to mint a 1 trillion dollar coin to help pay for the government expenses.
Unemployment has increased in the weeks following the end of stimulus relief. Many low-paying salaried employees have decided to opt-out of returning to work. Many people in the service industry have not returned to work since the U.S shutdown of businesses last year, due to COVID restrictions. With the increased work from home phenomena and automation taking over menial jobs, there is no going back.
Another factor to increased unemployment comes from newly enforced vaccination policies that have left many without a job. The Biden Administration is set to implement more COVID-19 vaccine mandates for employers by December.
This fall season, with new impending COVID-19 regulations, labor shortages, and supply chain issues, businesses are struggling to stay afloat. Since 2020, over 200,000 businesses were forced to shutter, adding to the nation’s economic woes.
Supply Chain Bottlenecks Are Aggravating Markets
If the labor shortage wasn’t enough to aggravate markets, the supply chain issue is surely bringing on the pain. As inflation continues to increase at an alarming pace, many consumers are wondering when prices will cool off.
Recently, the Fed stated that inflation is transitory and will cool off once supply chain issues are corrected. But is that exactly true? The Fed seems to overlook the fact that their unlimited supply of cheap money circulating the economy has increased demand for goods and services. More money people have to spend because of easy credit and extra money saved over the pandemic has lead consumers to purchase goods at very high rates. U.S. household wealth reached a high of $141.7 trillion. Homeowners saw their net worth increase with the housing market, with many people taking advantage of low-interest rates. As of Oct. 15, retail sales were up 0.7%.
The chip shortage is another factor with the lack of highly demanded supplies like automobiles, electronics, machinery, and other high-tech equipment available. As a result, car prices, both new and used have skyrocketed. Car manufactures cannot keep up with production and have lead people to the used car market. Ps5s and gaming equipment has become scarce as well.
Manufacturers are trying to keep up with production, but with the labor shortage, COVID-19 restrictions, and energy crisis, it seems like the problem will continue way into 2022.
Energy Crisis Adding To Supply Chain Problem
The current energy crisis is causing industrial powerhouses, China and India, to shut down factories in many of their provinces. China is struggling to source coal after several storms impeded coal production.
Oil prices hit past $80 this week. The US, UK, and the EU have demanded OPEC+ to boost output but seems to fall on deaf ears. The U.S. has suggested using the nation’s emergency supply to help relieve record-high gas prices Americans are currently enduring. Analysts have voiced concerns, that if oil and gas demands aren’t meet, we can soon see oil prices hit above the $100 mark.
Gold And Bitcoin Standing Tall
As the dollar struggles to make significant gains, gold and Bitcoin have attracted many investors who worry about a dollar collapse. As of Oct. 15, Bitcoin passed to the $60,000 mark, with many saying that it will soon pass $70,000. The current rate of inflation is sounding an alarm bell with many suggesting that stagflation can certainly be upon us.
Gold, silver, platinum, and palladium had an interesting week, with gold surging past $1,800. Seeing as the Fed is surely out of tools to stop the rate of inflation, many savvy investors are hedging their assets with gold as a way to protect their wealth. We will see what next week has in store for us.