Current Treasury Secretary and former Federal Reserve Chair Janet Yellen was at the G-7 Summit over the weekend telling stories to just about anyone who would listen…
“If we ended up with a slightly higher interest rate environment, it would actually be a plus for society’s point of view and the Fed’s point of view,” The Greatest Dove of All™ told reporters.
Now, if you’re asking yourself why she would make such a comment, you’re not alone…
But the answer is pretty simple.
She’s just setting the stage for the Federal Reserve to be able to officially raise interest rates later this year or in early 2022.
The thing is, rates don’t need the Fed’s help… They have been moving up all by themselves just fine, rising 93% relative to the November lows, and still trending upward.
The Greatest Dove of All™ is also setting the stage to explain away any additional inflationary spike caused by the upcoming infrastructure bill.
“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,” she said when pressed. “If this helps a little bit to alleviate things, then that’s not a bad thing — that’s a good thing.”
While true that prices were coming off of a low base, our practice would not describe this commodity price chart as “good” for society.
You bet your sweet bippy any additional government spending that specifically gets shoved into the commodity space will keep inflation “good” for a while.
Because inflation isn’t a linear function… It’s exponential.
And while exponential functions — like pandemics, for instance — start slowly, they can go vertical if not addressed.
And as long as that’s the case here, there will be upward pressure on interest rates, whether or not The Greatest Dove of All™ wants it.
But rising interest rates don’t just affect society, they also affect gold prices.
Specifically, they make them go down.
And just as we have been calling for the past few weeks, gold prices have peaked and are now trending lower.
And while the GLD short has been frustrating, our practice dictates that it is still correct.
Especially so if government officials are going to regularly go to the media and advocate for higher interest rates.
We remain patient.