Market Update September 1 2022

It’s an interesting time in the market. Below I shared my thought’s on the Fed’s Jackson Hole meeting and the latest
news in the gold equity sector. Thank you for reading and let me know if you have any questions. Enjoy a great Labor Day holiday.

Fiscal Policies at Odds with Monetary Policies to Fight Inflation

Biden’s announcement of student loan forgiveness, a $1 trillion Infrastructure bill, increased military
spending, on top of rising interest costs on Federal debt along with a projected 9.3% cost of living
increases on entitlement programs, are not the fiscal adjustments the Fed needs to fight inflation.
In a paper delivered at Jackson Hole Summit “Inflation as Fiscal Limit”, central bankers delivered the
message that they can’t do it alone. Politicians have no interest in adjusting fiscal policies and seem
more inclined to send out checks to counter the impact of inflation on the middle class rather than
tightening spending. The paper would seem to debunk Modern Monetary Theory. There is a
consequence to limitless spending after all.
Project (

“If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the
deterioration of fiscal imbalances leads to even higher inflationary pressure. As a result, a vicious circle of
rising nominal interest rates, rising inflation, economic stagnation, and increasing debt would arise.
In this pathological situation, monetary tightening would actually spur higher inflation and would spark
a pernicious fiscal stagflation, with the inflation rate drifting away from the monetary authority’s target
and with GDP growth slowing down considerably”

Gold Prices Running Out of Time to the Downside?

Gold Exchange Traded Funds (ETF’s) have experienced 11 straight weeks of outflows. Past periods of extended
outflows have been a positive contrarian indicator that a change in trend was close at hand.
Source: Raymond James Mining/Bloomberg

Central Banks Independence at Risk

Last year at Jackson Hole, Powell referred to inflation as “transitory”. This year he threw in
references to Paul Volker, the last Fed Chair credited with corralling inflation in order to claw
back some institutional credibility. Powell and FOMC members are hoping Fed bravado will
reestablish the Fed’s credibility after years of monetary malpractice. The problem is politicians
are getting increasingly skeptical and wondering if the Fed can do its job. It becomes more
pronounced in an election year. “What’s worse than high inflation and low unemployment?”
Sen. Elizabeth Warren (D., Mass.) told Mr. Powell at a June hearing. “It’s high inflation and a
recession with millions of people out of work.”
Can Central Banks Maintain Their Autonomy? – WSJ
Big Base for Gold Miners vs. S&P 500

Are shares of gold mining companies getting ready to outperform the S&P 500 in a meaningful way for
the first time since the bull move of 2001 – 2011? A major base has been established on the charts.

U.S Dollar Topping?

Ruchir Sharma, the Chair of Rockefeller International in recent op-ed piece in the Financial Times
warned “Don’t be Fooled by Recent U.S. Dollar Strength”. “Since the 1970s, the typical upswing in
a dollar cycle has lasted about seven years; the current upswing is in its 11th year.” We agree with
Sharma, there are clear signs U.S. dollar hegemony is nearing an end.

“Don’t Be Fooled By Recent Strength… A Post-Dollar World Is Coming” | ZeroHedge

You are now leaving OCM Gold Fund

Please click HERE to be redirected to Orrell Capital Management.

You are now leaving OCM Gold Fund

Please click HERE to be redirected to Orrell Capital Management.