Why gold keeps rising – maybe because the Fed is about to print again

Gold continues to rise week after week with corrections few and far between. What ever happened to those long multi-month slumps? Will they return? Eventually, maybe, but probably not anytime soon. Why not?

Because all the central banks around the world will be forced to print a lot of coins very soon. The banking system looks fine now, but there is a serious problem deep within the channeling of the global dollar-based monetary system that is about to come to the fore, possibly within weeks.

When there is a backup in the sewage system, no one notices at first. It can build for years without anyone paying attention. But then, suddenly, when the sewer comes to the surface, everyone notices at the same time, and everyone starts pouncing. Remember when Silicon Valley Bank collapsed overnight and we didn’t even get 24 hours warning? It just happened, and that was it? Well, something like this could happen to the treasury market in general, the backbone of the entire dollar system, upon which every other currency in the world is based.

But don’t worry. The system will not crash. The central banks will bail it out as they always do by printing a lot more money. It’s just that the currency we use as a result will be worth a lot less, a lot faster than we’re used to, mainly reflected in the exchange rates of the dollar for the monetary metals gold and silver, which have gone almost parabolic of late, and will keep growing even faster.

What’s happening down the drain is that bank reserves—those extra dollars held by banks that were handed to them by the Fed during previous money-printing episodes since 2008—are being depleted again, and $531 billion in October Treasury tenders are due to settle today, October 31the biggest story for a single month. $531 billion is about 10% of the total monetary base of 5.588 trillion dollars. Even if that amount clears without a hiccup, it’s not certain there are enough dollars to clear next month’s hurdle as well.

If dollars become scarce again, we could see increases in overnight lending rates for November, which will affect rates on the Treasury yield curve, and the Federal Reserve will have to step in and spit more dollars back into the system, and rapid. This means they will have to lower interest rates much more quickly and continue to expand their balance sheets during a period of rising consumer price inflation.

The result will be a renewal of inflationary monetary policy at a time when consumer prices are already rising faster than most of us are comfortable with.

On the other hand, the prices of all consumer goods fall sharply in terms of gold and silver. So there is a way out. It just takes rewiring our brains about what money is and why all currencies that have ever existed have inevitably ballooned into oblivion.

About Rafi Farber

Rafi is a monetary analyst and student at the Austrian School of Economics. He is the publisher End the Investor game on Substackdetailing what is happening in the banking system and what we can do about it. He lives in the Golan with his family. And no, it doesn’t evacuate.

Follow Rafi Farber on X

Featured investment companies in gold and silver (announcement)

“Best Overall” by Money Magazine, awarded for 6 years, thousands of 5-star ratings

Expand Details

Renowned for its exceptional customer service and commitment to transparency, Augusta Precious Metals has won numerous awards, including “Best Overall” from Money magazine and “Most Transparent” from Investopedia. The company’s dedication to educating and supporting customers has earned it top ratings from organizations such as BBB’s A+ and BCA’s AAA.

Industry leader with over $2 billion in gold and silver. Top Precious Metals Company with a Buy Back Guarantee

Expand Details

From precious metal auctions to outright gold and silver purchases, goldco has helped thousands of Americans place over $2 billion in gold and silver. Top Precious Metals Company Rated A+ by Best Business Bureau Triple A Rated by Business Consumer Alliance Earned 6,000+ 5-Star Customer Reviews Money.Com 2024 Best Customer Service 2024 Inc. 5000 regionals: ranked 17th in Pacific 2024 stevia gold award, fastest growing company inc. Beneficiary of 5000 awards, over 8 years

American Hartford Gold, ranked #1 gold company in Inc. 5000, boasts thousands of A+ BBB ratings and 5-star reviews, endorsed by Bill O’Reilly and Rick Harrison.

Expand Details

With over $2 billion in precious metals sold, American Hartford Gold helps individuals and families diversify and protect their wealth. Their team of experts provides investors with the latest market information and historical insight, ensuring informed decisions. Trusted by public figures and praised for exceptional customer service, the company offers competitive prices on top quality gold and silver coins, backed by a 100% customer satisfaction guarantee.

This article is for informational purposes only. The opinions and analysis herein are those of the author and are not financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investment based on this information. Investors should consider their financial situation, investment objectives and risk tolerance before making any decisions. Consultation with a qualified financial advisor is recommended. JPost.com is not responsible for investment losses from the use of this information. The information provided is for educational purposes only and should not be considered trading or investment advice.