The 2021 Halftime Report

01 Jul

The 2021 Halftime Report

The Year Inflation Returned!

2021 is half over, so with this post we look at where we are heading into the second half of what we can call the year of inflation’s return.

We suspect that our technically oriented readers will find it significant that gold bounced off lows around $1,678 twice this year, in both March and April.  One would expect gold to find strong support at those levels going forward.  

Gold closed on June 30 at $1,771.60.   

Silver finished the first half of 2021 with a June 30 close of $26.19.  Silver touched a low of $23.76 at the end of March.

US government debt finished the first half of 2021 at $28.3 trillion, up $600 billion in the six months.  

Of course, the big story of 2021 so far is inflation’s return, a story easily captured in the financial news headlines: “Gas Prices Surge to 7-Year High Ahead of Independence Day Weekend!”  Another: “Home prices in March saw highest growth in over 15 years!”

One more: “And Now Prices Are Really Soaring: June Rent Jump Is Biggest On Record”’

Bank of America analysts warned us in May of “transitory hyper-inflation” ahead.   Now it looks like the “transitory” part is on its way out.  Indeed, soaring prices may last for a long time.  That is according to the latest from BofA Chief Investment Strategist Michael Hartnett, who writes now that, far from transitory, soaring US prices may last up to 4 years.

Harnett says it is “fascinating so many deem inflation as transitory when stimulus, economic growth, asset/commodity/housing inflations (are) deemed permanent.”

Meanwhile, the inflation numbers keep inching higher and higher.  The latest Consumer Price Index shows a 5 percent increase in consumer prices over the past 12 months.  The increases over the past two reported months, April and May, would produce an annual inflation rate of more than 8 percent.  In any case, it is the largest 12-month increase in inflation since August 2008.

Deutsche Bank has observed that with its inflationary policies and its misunderstanding of monetary conditions, the US Federal Reserve will lead to a “chain of financial distress around the world.”

And finally, news flying in below the radar in the first half of this year of what we have called one of the most important and revealing financial megatrends of all:  central banks de-dollarizing and moving their reserves to gold.  

The Hungarian central bank announced that it had purchased 63 metric tons of gold in March, tripling its gold reserves.  But that was not the largest gold purchase of the year.  Sources report that Thailand purchased 9o tons of gold in April and May.

The first half of 2021 also saw the announcement from Russia that henceforth its sovereign wealth fund – the entity that collects profits from Russian-state oil production – will no longer hold US dollars.  The Russian National Wealth Fund is estimated to hold $119 billion in liquid assets of which $41.5 billion is in US dollars.  But the fund will abandon the dollar at once and henceforth be diversified among other currencies and a 20 percent gold allocation. 

We think de-dollarization at this time of inflation’s return is sound advice for our friends and clients.  Take steps now to prepare for growing turbulence in the second half of 2021.  Speak with a Republic Monetary Exchange gold and silver professional without delay.