However, dealer markups have not returned to their normal level and are now growing again. Those who expect their decline are waiting for the reasons for the high demand for precious metals to change. This may take some time. Those expecting a decline in prices should believe the following relatively far-fetched scenarios:
- The surge in inflation in the world is "temporary";
- Central bankers decide to stop incentives for economies;
- Politicians will give up lockdowns and compulsion to vaccinate;
- Disruptions in the supply chain will soon be eliminated;
- The unemployed, dependent on the state, will return to work;
- Bankers will stop manipulating prices for precious metals.
Until that happens, the economic and political environment will continue to drive crowds of new buyers into the gold market. And there will still be few investors willing to sell the yellow precious metal. The current shortfall in sales is not only due to limited supply in the market. Gold producers - miners, refineries and mints - are also facing challenges, including rising fuel prices, supply disruptions to equipment and parts, labor shortages, and plant closures.
Judging by the gold market, investors are betting on a quick solution to the above problems. In the meantime, there is no solution in sight to the growing US government debt other than further money creation by the Fed. The deal, which Republican Senator Mitch McConnell reached with Democrats last week, allows the government to borrow another $ 480 billion by December 3, 2021. At this point, the end of the current debate will undoubtedly allow the Treasury to continue selling Fed bonds.
The US Federal Reserve has a dual mandate: fighting inflation and ensuring full employment. To the extent that Central Bankers take this mandate seriously (and this is likely not the case), they face a real dilemma. The labor market signals the need for additional incentives, at the same time, rapidly growing inflation requires tightening monetary policy.
However, the unofficial mandate of the Fed is to stimulate the rise in stock prices and act as a last resort buyer for a new multi-trillion federal debt. This means that any attempt to tighten monetary policy is likely to be "showcase" and short-lived in terms of time frame.