July 2021
Well, here we are halfway through summer. Much of the world is attempting to get back to "normal" after the incredible disruption experienced over the last 18 months. However, finding the "new normal" is proving to be elusive. Mixed signals are everywhere, from the trajectory of COVID to the trajectory of economies around the world. Is inflation "transitory" or is it going to be with us longer than a few months? Real estate was in a heated froth this spring. In July it seems as though home buyers have gone on strike over skyrocketing prices. The same can be said for the car and light truck markets. Problems with the lumber supply chain seem to be resolving. But are they? And then there's food. It seems as though every week, there is something different missing from grocery store shelves. Finally, there is the labor market. Do people want to work? Or, as suggested in this article from Zero Hedge, are we are experiencing a shift in attitudes about our values and priorities that will permanently alter the labor markets worldwide?
It's evident that a consensus "new normal" has not yet been established and it may be a while before it is. What we can say is that we live in historic times. We may very well find that due to all of the shifting variables, we have more to say about what our personal new normal will look like than what is imposed on us by external forces. And that seems to us to be a very good thing.
All the best,
The OWNx Team
Gold and Silver
What Do the Charts Say?
Summer is typically a soft period for precious metals prices. After a rather large pullback in June, the price of gold has found strong support along its two-year uptrend line. At the same time, the gold chart is beginning to mark out a rather classic "wedge" formation. In this type of chart action, it is not unusual for the price rise to accelerate after it breaks out above the wedge formation. Presently, that is in the $1,880 range. With Thursday's closing price over $1,830, we certainly are in striking distance. On the downside, if the price of gold were to break below the uptrend line (presently at $1,750) it would change the intermediate-term outlook from bullish to neutral.
Silver continues to dance to its own tune. Its sideways trading range between $30 and $22 is intact. Thursday's closing price near $25.50 puts it almost exactly in the middle of the box. We should see it move to test either the upper or lower lines as gold tests its wedge trendlines.
Generally, after labor day we get a clearer picture of where the price of these two metals will head going into year-end. We anticipate August could be a rather quiet month with a possible pullback to test the lower chart lines in both metals. That would actually be ideal, as it would set up a strong base for the post-labor day move. We will know soon enough if that plays out.
In July 2020 we saw inflation was coming. It's here. Now what?
One year ago, in our July 2020 Newsletter, the headline for this section was "It looks like price inflation is coming in 2021." Now that it's here, what does it mean? How long will it be with us? Those are questions that we don't necessarily have answers to, but as readers of this newsletter know, we aren't ones to just accept "conventional wisdom." Today, that view is inflation is "transitory" and should subside by next spring.
We're not so sure. We are in new and uncharted territory. Projections made based on past metrics and analysis are not likely to hold sway this time around. Therefore, we will look at views from those who are looking at this present situation differently.
Why America's Labor Shortage Will Drive Inflation Higher
This article looks at what they see as major macro shifts in attitudes about work in general. "Add all this up and the conclusion is revolutionary: great swaths of the American workforce are already on strike or slipping away from the dead-end treadmill. The terms of employment will have to change dramatically, and that will drive inflation higher--or savage corporate profits--take your pick. Few see this now but they'll be forced to recognize it soon enough. If you doubt this, check back in 2025."
CEO's Sound the Alarm on Inflation
"Voicing opposing and controversial ideas leads to breakthrough solutions neither side considered. Many times, you share a lot more in common than you think." The challenge over the next few years will be to avoid entering into echo chambers that will further inhibit dialogue about major issues. However, we have all seen how the monopolistic practices of controlling news and opinion are not the answer. So what is?
Higher Inflation Is Here to Stay for Years, Economists Forecast
“We’re in a transitional phase right now,” said Joel Naroff, chief economist at Naroff Economics LLC. “We are transitioning to a higher period of inflation and interest rates than we’ve had over the last 20 years.”