Silver Futures Go Back Over $37, While Trump Writes Powell An Inflation Letter

The precious metals prices were mixed on Thursday, as after rallying into the morning, both gold and silver sold off sharply after today’s labor report came in slightly stronger than Wall Street’s expectations.

The gold futures fell on the announcement, although they recovered to finish the U.S. trading week at $3,336.

Silver fell on the labor announcement as well, but rebounded more sharply, and finished the session 31 cents higher to climb back over the $37 level again.

Yet on a day where there were no major trade developments (although the House did narrowly pass the Big Beautiful Bill), Trump wrote a letter to Jerome Powell with his latest views on the interest rate curve.

Fox News posted a video where White House press secretary Karoline Leavitt talked about the letter, and there were some comments that merit taking a closer look.

Perhaps most importantly, she mentioned that President Trump has said that the American economy is booming.

But if that's the case, then why is it necessary to lower interest rates even further?

At least the charade that the Federal Reserve has maintained over the last 100-plus years is that they lower interest rates when the economy is struggling. But now Trump is pressuring the Fed to lower interest rates while saying that the economy is still strong?

Leavitt also mentioned that ‘we've seen inflation completely diminished from where it was.’ Which I suppose is a slightly more defensible statement than when Trump suggested a few weeks ago that there was ‘no inflation.’

Although it is worth pointing out that every single government inflation metric is still currently above the Fed’s already incredibly arbitrary 2% mandate (did you know that Ben Bernanke’s actually the one that formalized that?!), with last week’s PCE and core PCE readings even showing an increase relative to the previous month (which was also already over the alleged 2% mandate).

Of course Powell recently said the Fed has already been discussing allowing the 2% inflation target to rise if they feel there’s been ‘an inflation shortfall’ (yes - he really said that, although no comment on the ongoing surplus we’re all still paying for).

So whether Powell cuts the rates, or his successor does, it feels like gold and silver are starting to sniff out what’s obviously coming if you can take even a medium-term perspective.

It was also interesting how towards the end of the clip, Leavitt reads the letter, and mentions how Trump included the phrase ‘no inflation,’ which she covered up quickly by saying ‘and the president is right, there is historically low inflation thanks to his policies.’

I’m not sure I’d agree with that one entirely either. But I’ll just point out that the government data (which is already pretty artificially low) does not support what Trump or Leavitt are saying.

Leavitt also mentioned that, ‘the one problem that remains, is high interest rates for the American people. The American people want to borrow money cheaply, and they should be able to do that. But unfortunately we have interest rates that are still too high.’

I don’t know that I agree that goosing rates lower so that Americans can get more levered up is really the best goal to be setting. Or that Americans have some sort of divine right to be able to borrow at rates that leave the lender struggling to match inflation, let alone actually get a positive return. But maybe I’m just old-fashioned on that one.

She then went on to mention how in Trump’s letter he compared U.S. rates to those in other nations right now. Although left out of her report was any mention of what lower interest rates following the collapse of the dotcom bubble did to the housing market a few years later. Or how even the generous CPI index is 25.3% higher than in May of 2020.

In support of Trump’s views on Powell was FHFA Director Bill Pulte, who posted a message on Twitter calling for Congress to investigate Powell and have him removed.

"I am asking Congress to investigate Chairman Jerome Powell, his political bias, and his deceptive Senate testimony, which is enough to be removed for cause."

Now to be clear, I’m no big fan of Jerome Powell. Although keep in mind that Pulte also recently said that with inflation at 2%, there’s simply no explanation for the Fed keeping rates at 4.5%.

Aside from how even the government inflation numbers are above 2%, just keep in mind that when some of these arguments are being thrown out there, sometimes people are ‘talking their book.’

That the Fed is going to continue cutting rates even though their own inflation metrics have still been above 2% for over 4 years, while Powell says the economy is still strong, is perhaps something that would be a more valid criticism.

Yet keep in mind that as Powell continues to say the economy is strong, he also did recently mention the following:

‘Higher real rates may also reflect the possibility that inflation could be more volatile going forward than in the inter-crisis period of the 2010s.

We may be entering a period of more frequent, and potentially more persistent, supply shocks—a difficult challenge for the economy and for central banks.’

So whether Trump ultimately gets the rate cuts as quickly as he wants, or whether he has to wait until his new choice takes over (and personally, I think Bernanke would be perfect for him), lower rates remain a heavy favorite.

Although far more importantly than any political or financial saber-rattling, is that I do hope you’re getting set for a safe and fun holiday weekend.

Yes, there are issues that our country will need to figure out how to handle, and some days it may seem a little gloomy. Although that’s all the more reason to enjoy what’s going well, and spend some time with those you love this weekend.

So happy 4th, and I’ll see you back here on Monday.


Sincerely,
Chris Marcus