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Gold & Silver Get Slammed on Positive Economic Reports

Gold has been the headline performer in the first half of the year – breaking records and commanding attention. But in the second half of 2024, silver may be set to steal the show.

Silver has been quietly outperforming gold since February. Silver prices surged to an 11-year high last month.

The junior monetary metal still has a long way to go in order to reach a new all-time high above $49 an ounce. Even if it doesn’t achieve that feat in 2024, it could still set a new record for a year-end closing price.

After silver spiked to $49 in early 2011, it slumped the rest of the year to finish disappointingly back below the $30 level. If silver can have a decent second half of the year, or better yet build on what it did in the first half, then it will have established a new precedent and a strong base for a further bull run ahead.

Recently though, the monetary metals are seriously taking it on the chin -- and what was looking like a positive week is now well into the red. As of last Friday afternoon, silver is down $2 to trade around $29.50 while gold is down $70 at $2,315.

Metals markets got a bit of a boost this past Thursday from weaker-than-expected jobs numbers that sent the U.S. Dollar Index declining. The Bureau of Labor Statistics reported that the number of Americans filing for unemployment rose to exceed the consensus estimate.

However, last Friday’s Nonfarm Payrolls report reversed things sharply as the May number was up 272,000, rather than the consensus forecast of only 190,000. The outperformance seemed to erase the unemployment number that was reported earlier in the week that gave a boost to metals.

Of course, bad news for Main Street isn’t necessarily bad for Wall Street. Anything that increases the odds of a Federal Reserve rate cut could carry bullish implications for stocks – at least in the short term.

But long-term investors shouldn’t be fooled into thinking that nominal stock market highs necessarily represent real underlying strength. The S&P500 has lagged behind both gold and silver year to date. In other words, stocks are losing value when priced in terms of sound money.

The U.S. dollar continues to depreciate at an elevated rate, making it difficult for the Fed to justify cutting rates. But dovish Fed officials may be encouraged by the European Central Bank, which opted this week to reduce its deposit rate by 25 basis points.

The ECB’s first rate cut in five years didn’t hurt the euro or trigger any sort of safe-haven buying of Federal Reserve notes. In fact, the U.S. dollar drifted lower versus a basket of foreign currencies. Perhaps currency traders are expecting America’s central bankers to soon follow suit with a rate cut of their own.

A pivot toward monetary easing would please Wall Street cheerleaders and Biden administration mouthpieces. Stock market bulls are looking for another excuse to push valuations even higher. And Joe Biden is desperate to get whatever polling boost he can from a stimulus injection into the economy.

The White House and its allies in the media act perplexed that voters generally aren’t happy with the way the economy is performing. They insist that Americans should be grateful for Bidenomics and the fact that inflation has come down.

The official rate of inflation may be lower now than it was a couple of years ago. But prices themselves haven’t come down. They continue to rise. And they are rising at a faster rate than they were when Biden took office, despite his repeated claims to the contrary.

A relentlessly rising stock market is a symptom of the problem. And for that matter, so are soaring precious metals prices, today’s pullback notwithstanding.

In the event that the economy rolls over, the stock market could finally do so as well. It’s already starting to weaken in real terms.

Economic stagnation plus high inflation is a terrible environment for conventional financial assets. Under stagflation, though, gold and silver can shine as alternative assets that help stabilize and boost investor portfolios.

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