Calm Before the Storm – Ep. 346

Podcast Break: Investor Summit at Sea
I apologize to everybody who has been waiting patiently for my next podcast.  Las week I went the entire week without doing a podcast, which is unusual. If you are a regular listener to this podcast you'll know that I was on a cruise ship all last week; I was on the Real Estate Guys' cruise.  The internet connections on a ship are very slow; particularly the upload speeds - plus I was very busy, so I really decided to take a week off from podcasting.
Markets  Were Overall Quiet
You know, there really wasn't that much that happened last week.  the markets were overall quiet, although the U.S  stock market rallied, gold didn't do much, the dollar didn't do much; no real earth-shattering news, so I didn't see any reason why I couldn't wait until I was back onshore, which is what I'm doing, and in fact, I was so  busy today that it is very late on a Monday night and I'm just trying to get this podcast recorded today.
FOMC Minutes Released
First of all, I'll talk about some if the stuff that happened last week.  We did get the release of the FOMC minutes, in fact, after the minutes came out we had a pretty big drop in the price of gold.  Gold did manage to get all the way up to about 1365 during the week before selling off and I think the Fed minutes were a catalyst to get gold to sell off.  Of course, it really can't get much below 1330; there is a lot of buying that comes in down there.
Fed Half Right
The read on the minutes was that they were hawkish in that the Fed was signaling that the economy is going to keep strengthening and inflation is going to keep rising.  Well, at least they're half right.  The economy isn't going to keep strengthening, but inflation will keep rising,
PPI Close to a Breakout
In fact, they're not even half right: They're right that inflation is going to go up, but it is going to go up by a lot more than they think, so even the part they got right they really got wrong.  We did get some inflation numbers - official measures of inflation that the government released last week.  If you look particularly at the Producer Price Index, core producer prices rose at the fastest pace in 7 years.  And if you look at a chart, we're very close to a breakout of resistance on core PPI.  Core CPI also up a little better than expected, but this is just the beginning of a trend.  During the week oil prices made new highs.  We got above $67 a barrel, so we're continuing to get closer and closer to 70 and eventually and 100.  It's not just oil prices that are rising, it's pretty much  commodities prices across the board.
Fed Will not Deliver Rate Hikes
But the Fed is not going to be able to deliver the rate hikes that the market is expecting and, again, it is the expectation of more rate hikes that is keeping a lid on the price of gold, but it's only a matter of time before the market blows the lid off and the price of gold goes up.