by Craig Hemke, Sprott Money:
Last month, we wrote about how employment is usually the ultimate lagging indicator of recession, and when the JOLTS jobs report was issued on April 4, the slowdown in hiring “jolted” gold prices higher. The latest report is having the same impact.
As we often do in these weekly columns, let’s begin this one with a reference to that last time we covered this topic. Here’s a link to the article of four weeks ago along with a snippet of the first three paragraphs:
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The latest JOLTS report, issued on May 2, continued the trend of declining and tightening labor market conditions. This is precisely what you should expect as the stagflationary recession begins to take hold in the U.S. economy:
The impact of this report on COMEX gold and silver prices was immediate. Prior to the report, Jun23 COMEX gold was trading near $1995. Two hours after the report, it was near $2020. The front month Jul23 COMEX silver rallied from $24.90 to $25.50 over the same period.
Precious metal prices are rallying as it becomes clearer that the Fed’s reckless policy of continued rate hikes is having a significant detrimental effect on the U.S. economy. Just as the Fed delayed hiking rates by claiming inflation was “transitory”, the same “experts” are now crushing economic growth by overhiking rates. Just as summer follows winter, the Fed will soon begin a renewed cycle of rate cuts and QE. The COMEX precious metals sense this and have responded accordingly, with prices up significantly from the lows in late 2022.
The deteriorating health of many local and regional U.S. banks is further complicating the situation for the Fed. The past six weeks have seen the 2nd, 3rd, and 4th largest bank failures in U.S. history, and yet the Fed is still expected to hike the fed funds rate by another 25 basis points at the conclusion of their FOMC meeting this week. What a remarkable level of arrogance and hubris!
It’s not as if this current “banking crisis” has been resolved, regardless of the efforts of Jamie Dimon, Jim Cramer, and others to jawbone banking sector stability into existence. This from Monday, May 1:
This from Tuesday, May 2:
And these banks haven’t even begun to feel the stress of the worsening collapse of commercial real estate. Just wait until those losses begin to kick in. J.P. Morgan and the other “too big to fail” banks can’t absorb them all.
So let’s wrap up this week with another reminder…
Now is not the time to worry over daily price fluctuations on COMEX. Instead, you need to ignore the economic cheerleaders who are simply attempting to buy themselves time. As the U.S. economy stagnates, the Fed will reverse course. Of this you can be certain. And don’t forget that 2024 is a presidential election year in the United States. The political pressure to cuts rates will soon become overpowering too. In fact, it has already begun—and the election is still 18 months away!
