The Great Unknowns of 2021

Dollar being destroyed

From Birch Gold Group

Given today’s 24-hour news cycle, President Trump’s bout with (and recovery from) COVID-19 is old news.

But in looking back at those uncertain few days, an article on Nikkei notes that the simple tweet announcing he got sick sent oil prices “tumbling $2 a barrel.” From a single statement, that’s a fairly substantial impact.

And due to his support for renewable energy, Joe Biden has had a similar impact on oil prices:

Shares in companies involved in renewable energy have climbed steadily since March, in contrast to oil-related names, which have fallen this year.

According to Shogo Maekawa of J.P. Morgan Asset Management, investors see “a long-term slump in oil demand.”

So when President Trump got sick, oil prices tumbled. Biden’s support for another energy sector is having a similar, albeit long-term effect. But both create economic uncertainty for oil.

The Fed isn’t helping, either. Once they changed their stance on inflation and decided to let it run hot, that created even more uncertainty in the markets.

In fact, comments from Fed Chair Jerome Powell’s to a joint House hearing in September, in which he called for greater fiscal stimulus in order to stimulate a faster economic recovery, apparently “shook market watchers”.

But will the economy actually recover faster, as Powell suggests can happen? So far, not much progress has been made on that front.

Continually Rising Inflation Is Still a Big Concern

Officially, inflation in the U.S. continues to rise.

According to the most recent report, “(CPI-U) increased 0.2 percent in September on a seasonally adjusted basis after rising 0.4 percent in August… Over the last 12 months, the all items index increased 1.4 percent before seasonal adjustment.”

And according to the most recent bar graph from the Bureau of Labor and Statistics, the floundering energy sector is still masking the real rate of inflation:


In addition to the sectors shown in the graph above, according to their latest official press release, some new contenders are also joining “inflation nation”:

The index for used cars and trucks rose 6.7 percent in September, its largest monthly increase since February 1969. The indexes for shelter, new vehicles, and recreation also increased in September.

If inflation for used cars and trucks remains at this rate, they could get pretty expensive in just a few months. But if inflation for basic necessities like shelter spins out of control, that could be a catastrophe in the making.

Finally, taking one more look at the Nikkei article, Hiroshi Watanabe of Sony Financial Holdings asserts it’s plain to see that the combination of election uncertainty, the Fed’s monetary policy, and expectations for even more inflation could be a boon for gold prices:

Blurring lines between fiscal and monetary policy leads to greater expectations for inflation, which pushes down real interest rates and leads to a currency depreciation and an increase in gold prices.

Gold and Silver Can Hedge Against the Unknowns

In a normal year, blurry monetary policy and rising inflation would make it an excellent time to consider diversifying some of your savings into precious metals. But in this oddest of years, and just weeks from one of the most important elections of our lifetimes, there may be no better time to get started.

At least then you’ll be doing everything you can to ensure your nest egg is set up to weather any storm caused by the unknowns, including the Fed’s “feel good story” about inflation.

2020, bls, Featured, nikkei