Precious Metals Attacked


Examining the above graphs, you will notice that both metal sustained a dip at about 8 to 8:30 AM.  Their normal modus operandi is to hit the market about 10 AM.  Why did they diverge from their standard plan?


Some point the timing to the release of the BLS report which took place at 8:30 AM.  By the way all times listed are EST.  The BLS report was the CPI for May 2018.  The CPI is the government’s measure of price inflation.


The next question is what does the price of metals have to do with the CPI.  The link is a mechanism that affects adjustments to payment to people receiving government entitlements like social security and federal retirees.  It is know as a ‘cost of living adjustment’.  The metals are historical known to be inflation hedges.  This means that by ‘normal’ economic theory, as the value of the dollar falls PMs should rise in response.  I say ‘normal’ because of actions just like this one.


If both the CPI and the ‘inflation hedges’ show that inflation is rising, this would result in the COLA allowance to be increase to account for the rising prices.  By raising the entitlement payments, the government will have a greater liability (they will have to pay out more money).  Social security is already slated to run out of money in about 14 years, if they monthly pay out is increased, the projected time till it runs out of money will be shortened.


By hammering the price of the PMs, they have some fuel to say that the CPI report was an anomaly and they will point to the PM prices to show that inflation is not on the rise.



Author: outwalking
Life time student

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