In a hole

It's the last chance for Jerome Powell, chairman of the world's most important central bank, the US Federal Reserve, to make a splash when he takes centre stage at the international central bankers' shindig at Jackson Hole today, Friday.

Next May his term ends. President Trump so often changes his mind that it's risky to make predictions but one probably holds true - he won't renew Powell's contract. Rarely has a US President been so publicly hostile to a Fed chairman. The President has called Powell a 'numbskull' and a 'knucklehead' - and those are just the public abuses.

The Powell-Trump squabble has been over interest rates, currently 4.25%-4.50%. Trump has angrily repeated calls for them to be much lower. Powell (and his Fed governors) have resisted any major cuts, conscious that inflation may be sleeping, ready to burst higher on any relaxation of monetary policy.

As gold owners we are on Trump's side of this argument; when interest rates go down the gold price tends to rise. But as people living in an economy, we don't want to live in one where inflation runs riot, because the fiat currency we use loses purchasing power. We'll come back to that.

Tariff terrors

The Fed's inflation target is to get and maintain the PCE, the price index for personal consumption expenditures, at an annual 2%. The PCE index is stagnant at a significantly higher level than that, 2.6% in June, against 2.4% in May.

Which contradicts Powell's dovish tone a year ago, when at 2024's Jackson Hole party he said "my confidence has grown that inflation is on a sustainable path back to 2%."

Since then we have had a change of President, his quixotic tariff war against many countries, and numerous attempts to work out their economic impact on America and the world. It's still too early to tell but the general consensus is that international trade will shrink and US consumers will suffer from higher prices for imported goods. The White House maintains that foreign exporters, not American consumers, will bear the brunt of additional tariff costs.

As yet tariffs have not resulted in higher costs for American consumers. Partly this is because the average tariff rate on US imports in June was 9%, much lower than many forecasts earlier this year; furthermore many goods have been exempted from the highest tariffs. Of the $258 billion or so of imports entering the US retail market in June only 48% was subject to tariffs. And importers stocked up on goods in advance of the tariffs.

So far the tariff terrors haven't arrived.

Won't be my problem

It would be out of character for Jerome Powell to make any riveting announcement this year. Far more likely is that he will congratulate the Fed on its calm management of a very uncertain, highly unpredictable economic situation.

Almost 80% of traders currently expect the next (September) meeting of the FOMC (Federal Market Open Committee, the rate-setting body of the Fed) will cut interest rates, down from more than 90% a week ago.

Cutting rates, despite the pressure from the President, would be a risky move. The inflation that can flow from tariffs is not a fast river but is more sluggish than the Mississippi - it will arrive later this year or into 2026.

Powell won't be able to make the same calm pronouncement this year that inflation is back on a 'sustainable path.' The 2% target looks increasingly remote. But by then it won't be his problem

Use gold as money

Which brings us back to the point about fiat currency. Why use it at all, when at best it will 'only' lose 2%/year in its purchasing power? Far better to use as money gold, which unlike fiat money retains its purchasing power.

If Powell shows uncertainty at Jackson Hole he will have made his mark as an honest Fed chairman. There's no need for any grandstanding and certainly no justification. The world - and the White House - is far too unpredictable. There's no call to be smug either - we all know that owning gold with Glint - physical allocated gold - is a great protection against uncertainty, plus a great way to buy the necessaries of life.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.