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Metal Market Report December 2021 - Week 3 Edition

December 2021 - Week 3 Edition

The Christmas Scale – Playing it Backward, and with Pauses

Every Christmas season, I play Morgan Freeman’s story of “The Christmas Scale,” the way his mother taught him – backward (from the top down), and with the correct pauses between certain notes.

I invite you to listen to the story, the way he tells it, by clicking this link. Merry Christmas!

Market Has Gold Prices Set for Increase

Gold initially fell to $1,755 on Wednesday morning, after the release of the headline news about this week’s meeting of the Fed’s Open Market Committee (FOMC), which meets eight times a year to set interest rate policy and adjust quantitative easing (QE), or money creation. Gold dropped on the initial reports of a more rapid “tapering” of QE to $30 billion per month, meaning that QE would end by next March. The Fed also implied there could be three 0.25% rate increases in 2022, which put a damper on gold, but gold bounced back after this initial over-reaction – since inflation and deficits continue to rise.

Our Mid-Month Review of the Dollar, Deficits and Inflation

The U.S. Dollar Index is up 7% so far in 2021, through December 13. This accounts for the entirety of gold’s 2021 decline, and a little bit more. The euro, by contrast, is down 7.7% to the dollar, which means that gold is up over 2% this year in terms of the euro, and gold is, in fact, near its 2020 peak in euro terms.

The Federal Deficit totaled $358 billion in the first two months of Fiscal Year 2022 (beginning October 1, 2021). That’s a $2.1 trillion annual rate, a small improvement on the $2.77 trillion deficit in FY 2021, but the cumulative federal debt reached $28.9 trillion at the end of November. That is a debt rate of $350,000 per family of four.

The Consumer Price Index (CPI) for November was released on Friday, reaching 6.8% for the last 12 months, the highest 12-month total since 1982. The November monthly gain was 0.8% (a 10% annual rate). Gasoline prices rose by another 6.1% and are now up 58.1% in the past year and vehicle prices are up 31.4% in the past 12 months. Some energy-based (battery or fuel) commodities have triple-digit 2021 price gains: Lithium (+378%), magnesium (+154%), ethanol (123%), cobalt (+117%) and coal (+106%).           

In Europe, energy inflation is worse: Eurozone natural gas is up 507%, and UK natural gas is up 428%.

The Producer Price Index (PPI) was announced Tuesday, December 14, rising 9.6% over the past 12 months, a new record high rate, although the PPI has only been tracked since 2010. Excluding food, energy and trade services, the “core” PPI rose 6.9%, but energy, food and the strong dollar (influencing trade) are huge parts of daily life and should not be subtracted when measuring the inflation’s impact.


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