Lyn Alden: The Real Driver for Higher Gold Prices
Tom welcomes Lyn Alden, Financial Newsletter Editor & Publisher, back to the show.
Lyn discusses the labor market and how it snapped back somewhat last year. However, it’s going to take a while to come back to previous levels. Unemployment is understated because some have stopped looking for work. Many of the additional unemployment benefits have been problematic for getting back lower-paid workers. This should change as these benefits run out.
The various stimulus programs and changes in people’s behavior have caused supply shocks in lumber and electronics. It will be important to watch the planned infrastructure spending because that will impact some sectors of the economy.
We’ve been in a secular bull market since the 1980s and have built a significant trade imbalance. We offshored a lot of our manufacturing, and there are several feedback loops driving equity valuations higher as a result.
Lyn explains how year-on-year data can be misleading and why in Q3, the statistics will appear to worsen.
Several factors could affect the CPI, including increased commodity demand globally. Some commodities may stay at new levels and might not fall much overall. CPI metrics are relatively inaccurate due to quality adjustments and lack of important factors like housing, healthcare, and food. The Fed plans to overshoot its 2% inflation target for a period of a few months. The question will be how difficult it will be to reduce it.
She discusses the impacts of growing base money and stimulus. We just had the largest year-on-year growth of the money supply since World War II.
Gold can be a hedge against negative real yields, and the timing for the next gold move will track real rates.
We’ve been in a free-floating currency rate system since the 1970s, and we may be entering another dollar bear market. The global demand for dollars is tied to oil, and there is a regular cycle based on fiscal policy. The dollar can have a detrimental effect on other currencies, with Turkey and Lebanon being recent examples.
In general, commodity bull markets are good for resource countries like Canada and Australia. There are some concerns at the moment regarding their housing markets.
Time Stamp References:
0:00 – Introduction
0:33 – Stimulus & Workforce
3:00 – Unintended Consequences
4:47 – Sectors & GDP Rebound
6:55 – Market Capitalization Risk
10:15 – Comparing CPI Metrics
14:10 – Q3 2021 Outlook
16:00 – CPI and Accuracy
18:04 – Fed Inflation Targeting
20:09 – Base Money Expansion
22:41 – Rising Yields & Gold
26:10 – Decade Outlook
28:28 – The Dollar Cycle
31:44 – Australia & Canada
33:25 – Equity Market Cycles
35:22 – Concluding Thoughts
36:52 – Wrap Up
Talking Points From This Episode
- Labor markets, stimulus and unemployment benefits.
- CPI Metrics and the Fed’s targeting of two percent.
- Commodities, inflation, and global growth
- Are we heading into a dollar bear market?
Lyn Alden is editor and publisher of LynAlden.com, where she has both a subscription and a free financial newsletter. She says, “Her background lies at the intersection of engineering and finance.” Her site provides investment research and strategy, covering stocks, precious metals, international equities, and alternative investments, with a specialization in asset allocation. Whether you’re new to investing or experienced, there’s a lot there for you.
Lyn has a bachelor’s degree in electrical engineering and a master’s degree in engineering management, focusing on engineering economics and financial modeling. She oversees the finances and day-to-day operations of an engineering facility.
She has been performing investment research for over fifteen years in various public and private capacities. Her work has been editorially featured or cited on Business Insider, Marketwatch, Time’s Money Magazine, The Daily Telegraph, The Philadelphia Inquirer, The Street, CNBC, US News and World Report, Kiplinger, and The Huffington Post. She has also appeared on Real Vision, The Investor’s Podcast Network, The Rebel Capitalist Show, The Market Huddle, and many other podcasts. She is also a regular contributor to Seeking Alpha, FEDweek, and Elliot Wave Trader.