The Old Guy and the Gold

Part II of Volume II, Issue IV

For three years, Mitch Day rode bitcoin’s wild swings, through the record highs of 2021 to the cold-water plunge of 2022.  Mr. Day and a number of his cryptocurrency compatriots have since turned to the asset favored by pharaohs, pirates, and Scrooge McDuck, helping drive an outbreak of gold fever.

“For a long time, I kind of figured, ‘Oh gold and silver?’ That’s kind of the old guy-thing,” said Mr. Day, a 27-year-old college student in Kelowna, British Columbia…

The SPDR Gold Shares exchange-traded fund, the largest ETF backed by physical gold, has gained about 20% in the past six months. Sales of American Eagle gold coins in January hit the highest monthly tally in more than a year, running close to last year’s pace through the first quarter, according to the U.S. Mint.

~ The Wall Street Journal, April 24, 2023

It is better to be lucky.  But I would rather be exact.  Then when luck comes, you are ready.

~ Ernest Hemingway

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Editor’s Note: This is Part II of Volume II, Issue IV of The Macro Value Monitor. Part I, The Bond Market Prelude is Beginning to End, can be found here.

To listen to The Macro Value Monitor, click on the headphones icon in the Substack app. A full PDF of this issue is available here.

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On May 3^rd, Fed Chair Jerome Powell walked out to the lectern at his regularly scheduled press conference following the meeting of the Federal Open Market Committee.  The press release shortly before had announced that the Federal Reserve had decided to increase the Fed Funds rate by 0.25%, to a range of 5%-5.25%.  On a nominal basis, this increase took short-term interest rates to the highest level since the summer of 2007, and it also marked the first time the Fed Funds rate was above the year-over-year rate of inflation since rising above it between November 2018 and September 2019.  Before that brief stint, real rates had been negative for a decade.

It may be the case that Chair Powell did not sleep well the night before, but he looked quite tired as he began to speak.  As he read his statement, mentioning that the labor market remains “very tight”, that “inflation remains well above our longer-run goal of 2 percent”, and that “tighter credit conditions are likely to weigh on economic activity, hiring and inflation” in the months ahead, he misspoke several times.  Although he may have just been tired, he came across as someone who is bearing the full weight of the awareness of the Fed having made one of the largest mistakes in its history on his watch.  And as he began to take questions from the press, his fatigue became more pronounced.