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GoldSeek Radio Nugget - David Haggith: The Fed's Rates and Implications for Gold


David Haggith, head of The Daily Doom, rejoins the show with a review of the macroeconomic data and charts via the video feature.

- David notes the Fed policymakers are far less dovish; startled by inflationary Core CPI numbers.
- The PPI is also elevated, 0.5% higher than expectations.
- Might the Fed raise rates in March?
- We review the US Unemployment Rate chart - is this trend concerning to the Fed?
- Did the Fed overreact to the epidemic, opening the monetary spigots too far?
- Inflation is a difficult specter to contain, once unbottled.

I don't base it on the economy being that strong. I just base it on what they need to do for inflation. I don't think inflation is rising because the economy is strong. I think the forces that are going to raise inflation the most is all that huge money they pumped into it, and also, if we get into a situation of shortages because of what's happening on the Suez Canal and the Panama Canal, those will be inflationary.

I just think that when you're fighting inflation down, it doesn't go down as easy as people think; you get some of the things, like, you know, the goods to go down, but the services, they're stickier. So we had a big drop in inflation because we got the easy stuff down. Now, we're into the hard stuff and the hard stuff wants to keep rising. It's just the nature of the inflation battle, then it wants to push up, and the Fed has to fight that and they need to knock the economy down harder to do it.

- Will the Fed risk rate hikes in an election year?
- Can gold stage a rally to new records amid rate hikes, similar to the 1970s?

There's an element here where the Fed stops raising rates and actually starts cutting rates. What I've said, is not only is going to happen when we have some serious economic breakage because the inflation part is far from one and jobs [data] are not giving the Fed the reason it needs to do that. So why would [the Fed] possibly consider going back to more economic stimulus at a time when [the Fed] think the economy is strong? 

He continues:

...I mean all along has been the Fed is going to keep tightening until something breaks, but we've got the everything bubble right now. We got bubbles on top of bubbles on something breaks, the collapse could be momentous and that could wind up being very good for gold. I mean, who knows? But generally, in a time like that, I think people are going to rush for safe havens. So that could actually be good for gold, the point, where the Fed starts cutting rates, because you have to look at why it will be cutting rates and it won't be because the economy's strong, it'll be because the economy's crashed. 

- The trend in US GDP remains solid - no signs of 2 back-to-back quarterly declines.
- Is the financial sector facing a risky technical situation - we review the chart with surprising results.
- Is the mountain of interest-rate sensitive derivatives on key money-lender's balance sheets, $250 trillions, unnerving investors?

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