After succumbing to a severe selloff in February, the metals complex rebounded to kick off the month of March. Gold and silver each advanced about 2.5% last week while platinum added an impressive 6.8%.

Metals were due for a technical bounce and buyers came in after some Federal Reserve officials signaled the central bank would likely pause its rate hiking campaign by this summer.

Back then, cash instruments offered little to no yield and, they did serve as a temporary haven from market volatility. But as is typically the case, investors rushed into an asset class at exactly the wrong time.

Even some Wall Street analysts who normally pitch stocks are touting cash as a superior risk/reward proposition. T-bills, certificates of deposit, and money market funds now return more than the dividend yields on blue-chip stocks without the accompanying volatility of equity markets.

Higher yields are also driving some investors out of precious metals related assets. Gold funds recently suffered outflows of $900 million.

Gold detractors argue that since bullion yields nothing, it less appealing than cash instruments which offer relatively attractive nominal yields.

That’s exactly what happened during the late 1970s. It was only when Federal Reserve chairman Paul Volcker jacked up interest rates to punishing double-digit levels that rates finally got ahead of inflation and the great precious metals bull run ended.

Current Fed chairman Jerome Powell hasn’t yet pulled off a similar feat. Despite his claims of “disinflation” taking hold, actual inflation gauges continue to come in hotter than expected while the Fed funds rate continues to lag behind.

That’s called a “negative real return” – and gold loves such conditions.

Meanwhile, bonds and cash instruments are virtually guaranteed to lose real value over time.

As history shows, over the long term, gold retains its purchasing power better than fiat cash or debt in any form.

• Monday, March 6th – Factory Orders.
• Tuesday, March 7th – Powell Testimony. Fed chairman Jerome Powell will testify before U.S. Senate and House committees on Tuesday and Wednesday. He will likely be pressed on inflation and his views about how much further rate hikes will go.
• Friday, March 10th – Nonfarm Payrolls. Economists expect the official unemployment rate to hold near a multi-decade low of 3.4%. Any disappointment will likely weigh on the U.S. dollar and lift precious metals markets.

This week’s Market Update was authored by Money Metals President Stefan Gleason.

Call Money Metals for Precious Metals Coins,
Bars, and Rounds 1-800-800-1865
We Buy Back Too!