Is Headline CPI Inflation “Fake News”?

Author: Frank Holmes
Date Posted: August 28, 2020 Read time: 53 min

The Federal Reserve just tweaked how it thinks about inflation, and this could have a huge impact on gold and gold mining stocks. But Fed Chair Jerome Powell's speech raises the question yet again if we're even measuring inflation accurately in the U.S.

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

Is Headline CPI Inflation “Fake News”?

The Federal Reserve just tweaked how it thinks about inflation, and this could have a huge impact on gold and gold mining stocks.

Speaking at Jackson Hole this week, Fed Chair Jerome Powell unveiled an adjustment in U.S. monetary policy that would allow inflation to average 2 percent over a period of time. The implication is that the Fed would let increases in consumer prices overshoot the 2 percent target rate, which the U.S. has rarely touched since 2012 (if we’re going by the headline consumer price index (CPI), which I’ll talk more about below).

To support this reframing of inflation, Powell says interest rates are likely to remain at near-zero for some time longer, possibly for another five years.

This policy change could be constructive for gold prices and, consequently, gold producers. This is something I’ve written and spoken about many times before. According to the World Gold Council (WGC), in years when the rate of annual inflation was greater than 3 percent, the price of gold increased 15 percent on average in nominal terms. That’s 10 percentage points higher than the increase that gold prices saw on average in years when inflation was 3 percent or lower.

gold price has historically rallied in periods of high inflation
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As of Friday morning, spot gold was trading near $1,970 an ounce, down about $1,000 from its all-time high. There could be even greater upside potential if inflation is allowed to expand at a higher rate.

But Are We Even Measuring Inflation Accurately?

Besides signaling possible gains in the price of gold, Powell’s speech raises the question yet again if we’re even measuring inflation accurately in the U.S. As you may be aware, the official CPI is controversial among some investors, academics and economists for a number of reasons. Many people believe that it doesn’t reflect the real changes in prices they’re seeing every day.

For the month of July, for instance, the Bureau of Labor Statistics (BLS) reported that prices for all urban consumers rose only 1 percent year-over-year. Even when we remove core items like food and energy, the increase was a paltry 1.6 percent.

Really? Everything, it seems, is up right now. Stock indices are at record highs. With bond yields at record lows, even before inflation takes its cut, investors are chasing dividend-paying stocks. Gas prices have creeped up to pre-pandemic highs. Nearly every metropolitan area (96 percent) in the U.S. saw an annual increase in home prices in the second quarter, according to the National Association of Realtors (NAR), with the median price climbing 4.2 percent to $291,300.

investors seeking yield in the stock market
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Here in San Antonio, where the cost of living is typically lower than the national average, median home prices rose 9 percent in July to $260,700. The average price exceeded $300,000 in July, up 10 percent from the same month in 2019.

And look at lumber prices. From the start of the year, the wood has soared 190 percent as lumber demand has surged on an increase in home renovations during coronavirus lockdowns and supply was constrained by closed mills. Today, lumber hit a new record high of $916.30 per board foot, almost three times higher than the 10-year average of $338. This has helped support share prices of home improvement retailers like Home Depot, up 33 percent year-to-date, and Lowe’s, up 40 percent.

lumber prices have continued to soar to new highs
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So is there a more accurate gauge of inflation than the CPI? I’m a fan of the site Shadow Government Statistics, or ShadowStats, which provides, among other things, alternate inflation data that uses the 1980 CPI methodology. For what it’s worth, if we use this definition of inflation, consumer prices actually rose 8.6 percent in July, not 1 percent, a not insignificant difference of 760 basis points.

is reported CPI inflation fake news? Shadow Stats alternate cpi versus reported consumer cpi
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Want to learn more about the relationship between inflation and gold? Watch the video below, and be sure to like it and subscribe to our channel!


Ohio Fund Adds Gold to Hedge Against Inflation

If you believe this—if you believe the headline CPI understates the impact of inflation—why wouldn’t you invest in gold?

I don’t think it’s a coincidence that institutional investors are starting to add gold to their portfolios at this time. This week, we learned that the $16 billion Ohio Police & Fire Fund will be taking a 5 percent position in the yellow metal as a hedge against inflation.  

If you recall, Texas became the first state in the U.S. to have its own gold depository when it opened the Texas Bullion Depository two years ago. At the time, I said that it might encourage other states to follow suit, and I’m pleased to see Ohio money managers realize that a 5 percent to 10 percent allocation to the precious metal is wise and prudent.

Improved Manufacturing Activity Is Also Inflationary

Earlier in the month I shared with you that manufacturing activity is improving around the world, as measured by the purchasing manager’s index (PMI). Factories in both China and the U.S., representing 40 percent of global economic output, are currently in expansion mode, with the official China PMI up for the past five straight months. Next week we’ll see the PMI numbers for August, and I’m expecting them to have ticked up even higher.

This type of activity is inflationary. New orders means greater demand for metals, energy and other commodities and raw materials, and this has the effect of pushing prices up.

This is why we’ve seen the copper price rise steadily off its pandemic low. Sometimes referred to as “Doctor Copper” for its role as an economic bellwether, the red metal is universally used in electrical wiring, construction, industrial machinery and more.   

dr. copper has seen strong support since the price bottom
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It’s not just asset prices that drive up inflation, of course. There’s also wage growth, and in many economies that produce much of the world’s goods, especially those in Asia, wages are on the rise.

manufacturing wage: china, india and southeast asian monthly base salary
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Of the countries featured above, China remains the most expensive to manufacture goods based on a monthly base salary of $493, but according to CLSA, Indonesia and Thailand both saw relatively high wage increases in 2019. You can see why many companies, including Apple, Samsung, Nintendo and GoPro, are moving out of China and relocating to Vietnam and other lower-wage economies.

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Gold Market

This week spot gold closed at $1,964.83, up $24.35 per ounce, or 1.25 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 1.98 percent. The S&P/TSX Venture Index came in up 2.05 percent. The U.S. Trade-Weighted Dollar fell 1.04 percent.

Date Event Survey Actual Prior
Aug-25 Conf. Board Consumer Confidence 93.0 84.8 91.7
Aug-25 New Home Sales 790k 901k 791k
Aug-26 Hong Kong Exports YoY -3.0% -3.0% -1.3%
Aug-26 Durable Goods Orders 4.8% 11.2% 7.7%
Aug-27 GDP Annualized QoQ -32.5% -31.7% -32.9%
Aug-27 Initial Jobless Claims 1000k 1006k 1104k
Aug-31 Germany CPI YoY 0.1% -0.1%
Aug-31 Caixin China PMI Mfg 52.5 52.8
Sep-1 Eurozone CPI Core YoY 0.9% 1.2%
Sep-1 ISM Manufacturing 54.5 54.2
Sep-2 ADP Employment Change 1250k 167k
Sep-2 Durable Goods Orders 11.2% 11.2%
Sep-3 Initial Jobless Claims 965k 1006k
Sep-4 Change in Nonfarm Payrolls 1518k 1763k


  • The best performing precious metal for the week was silver, up 2.66 percent as money managers raised their bullish positions to a five-week high in the futures market this past week. Gold and silver recovered on Friday after a volatile Thursday. Traders appear to be following the “inflation trade” that was reignited following Fed Chairman Jerome Powell’s dovish speech on monetary policy. The Fed is targeting inflation that averages 2 percent over time and won’t hesitate to act if consumer prices rise considerably above its goals. As seen in the chart below, gold has gained over the last 12 months as both the dollar and the yield on five-year Treasuries have declined.

gold gains broadening appeal as dollar and us yield decline
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  • The biggest Indian jeweler IPO could be in the works. Kalyan Jewellers India Ltd., a Warburg Pincus-backed company, said it plans to raise $235 million or 17.5 billion rupees. The company is remaining bullish on Indian gold jewelry demand even in the face of weakened consumption during the pandemic. Kalyan said about 10 million weddings take place annually in India, which creates demand for as much as 400 tons of gold in the form of jewelry. Turkey is set for a record year of gold output that the country’s central bank will likely buy in its entirety. Production is set to increase 16 percent to 44 tons, according to the Turkey’s Gold Miners Association. Bloomberg notes that legislation introduced in 2017 gives the central bank the right of first refusal to buy gold mined locally at prevailing market prices.
  • Sibanye Stillwater said it will pay an interim dividend of $79 million, its first in three years, after a surge in precious metal prices, reports Bloomberg. CEO Neal Froneman said “with restriction on economic activity relaxing globally, the outlook for precious metals prices is constructive.” Shandong Gold reported net income for the first half of 2020 of 1.15 billion yuan – a whopping 98 percent increase year-over-year. Revenue for the first six months was 33.1 billion yuan.


  • The worst performing precious metal for the week was platinum, but still up 1.14 percent. Despite hedge fund managers cutting their bullish positioning to a six-week low, investors have been adding significantly to the exchange listed physical platinum ETFs over the course of the summer months. Gold fell on Wednesday after the surge in U.S. new home sales and decreased U.S.-China trade tensions outweighed inflation expectations, reports Bloomberg. The metal had a wild trading day on Thursday with prices $30 higher at one point and down $25 at other, reports Kitco, after Fed Chairman Powell’s comment about letting inflation run hotter, however the metal shortly slumped on recognition the Fed provided no credible plan on how they would lift inflation.
  • India’s gold jewelry and retail investment demand will slump to just 350 to 400 tons in fiscal year 2021, according to UBS Group. The second-largest gold consuming nation is likely facing its worst ever recession due to the pandemic and consumption is unlikely to record to normal levels anytime soon. The UBS report says India consumed 633 tons in 2020.
  • De Beers, the world’s top diamond producer, has decided to cut the price of its gems in hopes of sparking sales amid the paralyzed industry. Bloomberg reports that De Beers cut the price of rough diamonds bigger than one carat, a size that would usually yield a polished gem of about 0.3 carat size. Largest stones had price cuts of almost 10 percent. Russian diamond miner Alrosa PJSC is also cutting prices, but the billing system has changed so buyers can’t tell which stones are discounted or by how much.


  • Nomad Royalty is buying Coral Gold Resources in a deal valued at $45.8 million. Nomad also announced this week that it is acquiring a cash flowing royalty on the Moss gold mine in Arizona through the acquisition of Valkyrie Royalty Inc for $7.6 million. Brixton Metals Corp is acquiring a 100 percent interest in the Metla mineral claim group from Stuhini Exploration in Canada – expanding its existing Thorn project.
  • Mint Innovation, a New Zealand start-up company, plans to open a refinery in the U.K. for extracting precious metals from electronic waste. Bloomberg reports this would be the world’s first commercial operation to use bacteria rather than cyanide-based processes to recycle precious metals from electronics. A United Nations report found that at least $10 billion of gold, platinum and others were thrown away every year in e-waste.
  • Nicholas Johnson, portfolio manager at Pacific Management Co., says gold still has room to run. “Despite the recent run-up in gold prices, we believe gold remains attractively valued – one might even say cheap – in the context of historically low real interest rates.” Johnson says that with yields on 10-year Treasuries below zero, it strengthens the value on non-yielding bullion.


  • Russian gold miner Polymetal said operations at its hub in Omolon have been suspended temporarily due to the virus as one-third of workers tested positive. This serves as a reminder that the pandemic remains a threat globally. Despite that negative headline, the company reported H1 revenue up 21 percent and is on track to meet its 2020 production guidance of 1.5 million ounces.
  • Ghana’s former President John Dramani Mahama said he will reverse the establishment of the country’s gold royalty fund if he regains power in the country’s December election. Mahama said the fund is a “very shady deal” and the fund would benefit just a few people.
  • More businesses are facing the grim reality of having to let employees go during the pandemic. MGM Resorts is laying off 18,000 of its 62,000 furloughed workers.  Coca-Cola is offering buyouts to 4,000 employees and noted layoffs could be coming. Capital One Financial is cutting borrowing limits on credit cards, limiting its exposure as the U.S. reduces support for millions of unemployed Americans. Five months after Peru reported its first Covid-19 it overtook Belgium as the nation with the most deaths.  Their Deputy Health Minister noted the number of deaths is probably closer to 50,000 versus the official tally of 25,648 on Thursday.

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Index Summary

  • The major market indices finished up this week. The Dow Jones Industrial Average gained 3.30 percent. The S&P 500 Stock Index rose 3.62 percent, while the Nasdaq Composite climbed 3.82 percent. The Russell 2000 small capitalization index gained 0.90 percent this week.
  • The Hang Seng Composite gained 2.54 percent this week; while Taiwan was up 2.96 and the KOSPI rose 3.50 percent.
  • The 10-year Treasury bond yield rose 7 basis points to 0.724 percent.

Domestic Equity Market

SP 500 Economic Sectors weekly performance
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  • Communication services was the best performing sector of the week, increasing by 4.79 percent versus an overall increase of 3.26 percent for the S&P 500.
  • was the best performing S&P 500 stock for the week, increasing 30.63 percent.
  • Jack Ma’s Ant Group filed for its IPO, which could reportedly be the biggest ever, reports Business Insider. The company is targeting a $225 billion valuation and could raise as much as $30 billion in the offering if demand holds up, people familiar with the matter told Bloomberg.


  • Utilities was the worst performing sector for the week, decreasing by 0.65 percent versus an overall increase of 3.26 percent for the S&P 500.
  • Hologic was the worst performing S&P 500 stock for the week, falling 9.56 percent.
  • Hertz is seeking a $1.5 billion bankruptcy loan after regulators blocked its controversial $500 million share sale, report says. The car-rental giant and former day-trader darling reportedly asked its current lenders and potential outside investors for fresh financing this week, writes Business Insider.


  • Apple and Tesla’s upcoming stock splits could push them 33 percent higher in the next 12 months, an analyst who looked at 60 years of data says. Retail trading firm eToro analyzed 60 years of stock splits by major US firms, and found that on average, the companies’ stocks climbed a third in the following year.
  • Amazon announced its new wearable "Halo," which it says can judge the emotion in your voice and scan your body to calculate body fat. The product could be direct competitor to smart wristbands made by Apple and Fitbit.
  • Snowflake, the $12.4 billion cloud data warehousing startup, filed to go public. The tech company reported that its revenue jumped from $97 million in 2019 to $264.7 million in 2020.


  • Nobel Prize-winning economist Paul Krugman starkly laid out the disconnect between the stock market and the real economy in a scathing op-ed, writes Business Insider. He warned that investor optimism over Big Tech’s profits would not go far as people cannot survive on "rosy projections" about the future.
  • Apple’s is making it harder for some companies like Facebook to track people, with Facebook replying that it will decimate part of its business. In fact, Facebook said iOS 14 could severely hurt its Audience Network ad network, reducing revenue by up to 50 percent.
  • Short bets against U.S. stocks have fallen to the lowest level since records began as the market’s seemingly endless rally continues. Even the most pessimistic investors are struggling to bet against U.S. stocks at the present time. From a contrarian point of view, that could portend trouble ahead.

The Economy and Bond Market



  • U.S. orders for durable goods rose in July by more than double estimates amid a continued surge in automobile demand. Bookings for durable goods—or items meant to last at least three years—increased 11.2 percent from the prior month after a 7.7 percent jump in June, Commerce Department data showed Wednesday. The median estimate in a Bloomberg survey of economists called for a 4.8 percent gain in July.

US durable goods orders posts strong gain in July 2020
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  • Sales of newly built, single-family homes rose to its highest pace since 2006, up 13.9 percent to a seasonally adjusted annual rate of 901,000 units in July, according to data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The July rate is 36.3 percent higher than the July 2019 pace. New home sales are up eight percent on a year-to-date basis.
  • U.S. consumer sentiment increased slightly in late August on an improving economic outlook, while remaining well below pre-pandemic levels. The University of Michigan’s final sentiment index for August was 74.1, compared with a preliminary reading of 72.8 and July’s final reading of 72.5, according to data released Friday. The median estimate from economists surveyed by Bloomberg called for 72.8; the gauge is still just above April’s pandemic low of 71.8.


  • A second reading of the U.S. economy in the second quarter reflected the biggest quarterly plunge in activity on record, though the Covid-induced plummet wasn’t as bad as initially estimated. Gross domestic product (GDP) from April to June tanked 31.7 percent on an annualized basis, according to the Commerce Department’s second reading released Thursday. That was revised down from the 32.9 percent initial estimate of the damage the pandemic-fueled lockdowns had on the economy in the second quarter. Economists surveyed by Refinitiv had expected a decline of 32.5 percent. Even with the revision, it was still the worst contraction in the economy ever recorded. The drop in GDP was more than triple the previous all-time decline.
  • The number of Americans who filed for unemployment benefits for the first time came in above 1 million for the 22nd time in 23 weeks as the economy struggles to recover from the coronavirus pandemic, the Labor Department said Thursday. Initial U.S. jobless claims totaled just over 1 million for the week ending Aug. 22, down from 1.104 million in the previous week. Economists polled by Dow Jones expected initial jobless claims expected claims to come in right at 1 million. It was the second consecutive week that new claims were above 1 million. Initial claims were last below 1 million the week of August 8, when they totaled 971,000. Since the pandemic began, initial jobless claims have jumped by more than 58 million.
  • Economic activity in the U.S. continued to expand in July, though at a slower pace compared with that of June, data from the Federal Reserve Bank of Chicago showed Monday. The Chicago Fed National Activity Index stood at 1.18 in July, down from an upwardly revised 5.33 in June. Economists polled by FactSet expected the index to be at a much higher level of 4.0.


  • Investors next week will probably take comfort from the ISM manufacturing and non-manufacturing PMIs, which are due on Tuesday and Thursday, respectively. Both PMIs are expected to edge slightly lower in August but remain comfortably above the 50 expansionary level.
  • Americans who once drove to work are saving an estimated $758 million a day since the onset of the Covid-19 pandemic, according to a new study by Upwork economist Adam Ozimek. That collectively adds up to an overall economic impact of almost $91 billion, the study by the freelancing platform found. The savings are broken down into several categories including direct costs and time value, with the latter producing the greatest economic benefits. Putting a modest value of $12.50 an hour on time spent commuting by car, Americans collectively are saving $411 million a day by staying home.
  • The Federal Reserve looks likely to keep short-term interest rates near zero for five years or possibly more after it adopts a new strategy for carrying out monetary policy. The new approach, which could be unveiled as soon as next month, is likely to result in policymakers taking a more relaxed view toward inflation, even to the point of welcoming a modest, temporary rise above their 2 percent target to make up for past shortfalls.


  • The U.S. economy needs more stimulus to slash the risk of a “double dip” recession, former Fed official says. Fiscal policy will be key as there’s limited scope to lower interest rates or ramp up asset purchases, ex-Atlanta Fed president Dennis Lockhart said. Furthermore, White House Chief of Staff Mark Meadows predicted there will be no stimulus deal with Congress until the end of September, and sought to blame House Speaker Nancy Pelosi for the delay. “If we got back in the room with some of their priorities, we could cut a deal — the president wants to do that. But I’m not optimistic,” Meadows said in an interview with Politico on Wednesday. 
  • Initial claims for unemployment benefits have flatlined around 1 million in recent weeks. While this may be significantly down from the peak of 6.6 million in April, it’s still extremely high by historical standards. The slowing trend is likely to be reflected in the August nonfarm payrolls report out next Friday. Analysts are projecting payrolls to rise by 1.55 million, which may seem like a large number but would only be enough to nudge the unemployment rate down from 10.2 percent to 9.9 percent. Compared to where the jobless rate was prior to the pandemic—at 3.5 percent—there is a long way to go before the Fed can say mission accomplished.
  • Investors may be underestimating the lasting economic effects of demand, consumption and employment staying depressed for a protracted period. If bond markets are correct in what they’re signaling, the Fed’s job of keeping rates low might get complicated by rising inflation.

Energy and Natural Resources Market



  • The best performing commodity for the week was corn, up 5.73 percent largely on concerns of pending harvest yields in the U.S. and Europe. China announced plans to buy up to 2,000 metric tons of cobalt for its national reserve, which sent prices soaring. The cobalt spot price on the LME rose by 14 percent to $33,000 per ton in August alone. The 100-day moving average for the LME two-month copper contract crossed above the 200-day moving average. This is a bullish technical signal for the red metal. Inventories of copper fell to the lowest since 2005 – a sign that demand has picked up.

copper backwardation strengthens as LME stocks dwindle
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  • Base metals are heading for the longest string of monthly gains in more than a decade on the heels of improving economic data and tightening supplies. The LME Index tracking six base metals is on course for its fifth straight monthly gain in August and is up 28 percent since the end of March.
  • Investors are piling in many precious metals, not just gold. Platinum holdings in ETFs have surged to a new record high with more than 600,000 ounces added since mid-May, according to data compiled by Bloomberg. Platinum is still down around 3 percent for the year, compared to gold up 29 percent, but has rallied 66 percent from its 2020 low.


  • The worst performing commodity for the week was iron ore, down 3.01 percent. Iron prices fell on Thursday after BHP Group, a top producer, said it expects moderate prices on rising supplies. Bloomberg notes that Vale SA made similar comments in July. Crude oil stayed in its tight trading range around $43 barrel after Hurricane Laura appeared not to inflict damage on key infrastructure.
  • Technology companies are taking over the American stock market, as evidenced by the shocking reshuffling of the Dow Jones Industrial Average this week. Exxon Mobil Corp was booted from the 30-stock index. This marks a stunning fall from grace for the oil major that was the world’s biggest company as recently as 2011. The move also highlights the shift away from energy, particularly fossil fuel producers.
  • Lumber is one of 2020’s best performing commodities – up nearly 80 percent – as consumers stuck indoors during the pandemic have spent more on home renovations. The commodity hit an all-time high last Friday, then fell by the most on record on Monday. Lumber’s 30-day volatility jumped to the highest since May. Bloomberg notes that lumber is thinly traded and prone to wide swings, which investors might not tolerate.


  • Chinese coal miner Shanxi Coal International Energy Group is making an unusual investment in the competing business of high-tech solar power cells, reports Bloomberg. The state-owned company will lead a joint venture to build a solar manufacturing plant as phase one in a project that will grow to 10 gigawatts. This is the equivalent of generating power from 10 nuclear power plants.
  • Tata Motors and Hyundai motor won the bid for India’s Energy Efficiency Services (EESL) long-range vehicles. EESL produces cars in bulk and leases them to users for a charge that is equal to or lower than that of a fossil fuel car. Bloomberg reports that Tata will supply 150 units of its Nexon model and Hyundai will offer its Kona model – both with close to a 300-kilometer range.
  • Horizonte Minerals, whose shareholders include Glencore and Teck Resources, is seeking $480 million in financing for its Brazilian ferronickel project. Although nickel is currently oversupplied, it is a key component in rechargeable batteries that are seeing growing demand. The project would come online in the next two years.


  • Minera San Cristobal said it halted a zinc-lead mine in Bolivia after 41 workers tested positive for coronavirus. The miner said it will redesign operations to restart production that doesn’t put any of its 1,400 employees at risk. This serves as a reminder that the pandemic remains a threat globally.
  • Category 4 hurricane Laura hit the Louisiana and Texas coasts this week, prompting oil and chemical facilities shutdowns. Some of the largest American refineries shut down in advance of the storm and potentially cuts off more than 1 million barrels a day in capacity. 82 percent of all oil production in the Gulf of Mexico was offline as of Monday. A chemical plant in Arthur, Texas leaked 8.7 tons of nitrous oxide – just from stopping and starting the petrochemical plant to defend against the storm.
  • Ghana’s former President John Dramani Mahama said he will reverse the establishment of the country’s gold royalty fund if he regains power in the country’s December election. Mahama said the fund is a “very shady deal” and the fund would benefit just a few people.

25 surprising facts about gold slideshow

Emerging Europe



  • Romania was the best performing country this week, gaining 1.4 percent. The latest survey of Bloomberg economists suggests that GDP will contract only 5.1 percent in 2020, compared to 5.3 percent expected last quarter, and well above the predicted 8 percent contraction for the whole eurozone area. Societatea Energetica Eelctrica, an electric power distributor, was the best performing equity trading on the Bucharest exchange, gaining 5 percent over the past five days.
  • The Polish zloty was the best performing currency this week, gaining 1.5 percent. Most emerging European currencies gained, supported by the Federal Reserve’s dovish tone. On Thursday, Fed Chairman Jerome Powell announced that inflation will be allowed to run higher than the standard 2 percent target before hiking interest rates. A prolonged period of lower rates in the United States should pave way for stronger emerging market currencies.
  • Information technology was the best performing sector among eastern European markets this week.


  • Hungary was the worst performing country this week, losing 3.3 percent. Stocks underperformed due to weaker economic data. Economic and business sentiment deteriorated in August while unemployment increased to 4.8 percent in July from 4.6 percent the prior month. The central bank left the main rate unchanged at 60 basis points as inflation spiked and the forint underperformed its peers. CIG Pannonia Life Insurance was the worst performer among stocks trading on the Budapest exchange, losing 11 percent over the past five days.
  • The Turkish lira was the worst performing currency in the region this week, losing 30 basis points. The currency continued its downward spiral despite the dollar’s sharp correction over the past five days. The central bank has been trying to support its currency by buying liras in currency markets for months now but is running out of dollars to do so. Economists say the Turkish central bank has begun borrowing dollars deposited in Turkish banks by businesses and residents.
  • Energy was the worst performing sector among eastern European markets this week.


  • According to New Scientist and the Financial Times, Europe’s second wave of the coronavirus is less deadly compared early days of the pandemic. The strain currently circulating on Europe, a mutated version of the coronavirus, is making the illness less deadly (through no conclusive evidence). More testing, changes in ages of those infected, and improvement in treatment of sick patients are the main reasons why fewer people are becoming seriously ill and even fewer are dying.
  • Bloomberg reported that Poland installed almost 1 gigawatt of solar during the first seven months of 2020, boosting an already positive outlook for the sector. Poland has passed France to become the fourth-largest solar market in Europe, after Germany, the Netherlands, and Spain. Most of the installations happened in the residential sector, which the government supports with grants.

Poland becomers fourth largest solar market in europe
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  • Countries around the world continue to provide support to their troubled economies. Eurozone money supply was reported on Thursday with significant acceleration to 9.6 percent year-over-year. The total money supply readings for the eurozone, the United States and China, sum to $65.8 trillion with a total increase of 13.9 percent, which should lift asset prices, according to Ed Hyman of Evercore ISI.


  • Last Saturday morning Alexei Navalny, one of Putin’s biggest critics, was allowed to leave Russia. He remains in an artificial coma and in an intensive care unit in Germany’s capital where he’s being treated for his illness. German doctors claimed that they have found cholinesterase inhibitors in his system. Cholinesterase inhibitors act by blocking a key chemical in the body, acetylcholine, that transmits signals between nerve cells. If German doctor’s findings confirm that he was poisoned, this could turn into a bigger geopolitical issue.
  • The Turkish lira continues its weakness against the dollar despite tighter policy. On Monday, local lenders had to borrow lira at the central bank’s most expensive rate, the late-liquidity window rate, where the cost of money stands at 11.25 percent. Bloomberg reported that the weighted-average cost of central bank funding is now 9.61 percent, up more than 220 basis points from a low in mid-July.
  • Tensions between two NATO allies, Turkey and Greece, are on the rise over drilling rights in the Mediterranean Sea. The conflict goes back to 1974 when Turkey invaded Cyprus, and the island was split. The recent root of the conflict was the discovery 10 years ago of massive natural gas fields in the Eastern Mediterranean Sea, and as more gas has been discovered, countries have been disputing their rights to often-overlapping offshore areas known as exclusive economic zones.

China Region



  • India was the best performing country this week, gaining 2.7 percent. Equites moved higher despite economists predicting the country’s revenue to fall into a new range between 15 percent and 25.9 percent in the second quarter, representing the worst performance since India started reporting quarterly data in 1996. GDP data will be released on Monday. Indusind Bank was the best performing equity among the stocks trading in the India Nifty50 Index (NIFTY), gaining 30 percent over the past five days after UBS upgraded the stock rating to a buy.
  • The India Rupee was the best performing currency this week, gaining 2.7 percent. Most of emerging markets currencies gained on dollar weakness, but India Rupee outperformed peers supported by strong foreign inflows as the central banks stepped away from dollar purchases.
  • Telecommunications stocks were the best performing among the stocks trading on the Hong Kong Stock Exchange.


  • Taiwan was the worst performing market this week, losing 35 basis points. Taiwanese President Tsai Ing-wen wants to focus on strengthening the island’s defense, amid rising threats from China.  China claims Taiwan as its own territory and has recently stepped up its threats to sue to annex it. On a positive note, Taiwan is taking off restrictions on imports of pork and beef from the United State, strengthening U.S.-Taiwan relations. Novatek Microelectronics Corporation was the worst performing equity among the stocks trading in the iShares MSCI Taiwan ETF (EWT), losing 5.7 percent over the past five days.
  • The Thailand baht was the worst performing currency this week, losing 3 basis points. The currency is set for its biggest weekly gain since July, although underperforming its peers on a weekly basis.
  • Materials were the worst performers among the stocks trading on the Hong Kong Stock Exchange.


  • China will likely fall short of the amount of imports it agreed to from the U.S. in January. However, the country is still set to purchase a record number of soybeans this year. Larry Kudlow, chief economic advisor to President Trump, said in Fox Business interview that China is “doing basically what they should be doing – they’re buying a ton of commodities, particularly agriculture commodities. It’s probably the best we’ve seen in at least half a dozen years.” Bloomberg reports that in a meeting this week the two superpowers reaffirmed their commitment to phase one of the trade deal.
  • Premier Li Keqiang said China’s economic policy platform focusing on six key areas have achieved positive results in Chongqing. Li said the economy can achieve growth throughout the year and add more than 9 million urban jobs. As you can see in the chart below, Chinese stocks are leading the way and have caught up with U.S. stocks.

chinese stocks lead the recovery
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  • Ant Group, whose largest shareholder is Alibaba, filed for initial public offerings in both Hong Kong and Shanghai. The dual listing could be one of the biggest debuts in years, and even top Saudi Aramco’s record $29 billion IPO, according to a person familiar with the matter. Bloomberg notes that Ant Group is targeting a valuation of $225 billion based on an IPO of $30 billion.


  • Hong Kong reported its first confirmed case of COVID-19 re-infection this week. A 33-year old man was found to be re-infected upon returning from Europe, after contracting the virus initially months earlier. Reuters reported than two European patients have also been confirmed to have been re-infected. This debunks the idea that patients cannot be re-infected after recovering.
  • The Chinese military fired an “aircraft-carrier killer” missile into the South China Sea this week, reports SCMP, which sends a warning signal to the U.S. This happened just one day after China said an American spy plane entered a no-fly zone. The U.S. sanctioned Chinese entities in the South China Sea to target state-owned companies involved in advancing Beijing’s claims in the contested body of water.
  • Japanese Prime Minister Shinzo Abe, the country’s longest serving premier, confirmed he will step down from his role following recent deterioration in his health. Abe said he needs treatment for ulcerative colitis, which ended his first term in office in 2007. The announcement came as a surprise Friday morning and appeared to catch key members of Abe’s ruling party off guard, reports Bloomberg.

Blockchain and Digital Currencies



  • Of the cryptocurrencies tracked by CoinMarketCap, the best performing for the week ended August 28 was Medalte, up 7,941.10 percent. As Chairman Jerome Powell said this week, the Federal Reserve will let inflation pass 2 percent. This news moved bitcoin slightly higher, briefly touching $11,600.

bitcoins move this week
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  • Sberbank, the largest state-owned bank in Russia, is working with a major domestic airline company to introduce a blockchain-based ticket sale system, writes CoinTelegraph. Sberbank is reportedly collaborating with S7 Airlines on a new ticket sale platform that will enable corporate clients with instant settlement through smart contracts and tokens.
  • The chief strategist at Fidelity Investments is heading a new bitcoin index fund that appears to be Wall Street’s play for high-dollar institutional crypto bets, writes CoinDesk. A Wednesday morning filing with the SEC revealed the new fund, which is the latest example of Wall Street veterans warming up to the popular digital currency.


  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week ended August 28 was VARC, down 77.58 percent.
  • A major Australian financial services firm is suing U.S. blockchain company Ripple Labs, writes CoinDesk, over allegations of trademark infringement. A court document claims that Ripple breached Australia’s Trade Marks Act (1995) and the Australian Consumer Law with the unauthorized use of its brand and trademark “PayID.”
  • What is being called a “critical bug” has left 13 percent of Ethereum nodes useless, reports CoinDesk, highlighting what is a growing chink in the network’s armor: client centralization. Such bugs would be a normal issue if it weren’t for the length of time it will take to fix and additional strain it’ll place on the majority client, the article continues.


  • In a bid to expand its roots in Asian markets, cryptocurrency derivatives exchange Bybit has added support for the Japanese yen and South Korean won, reports CoinTelegraph. This takes the total number of supported fiat currencies to 43. With Vietnamese language support also added to the platform, Bybit CEO Ben Zhou is expecting “substantial growth in the Asian numbers.”
  • Quorum, the enterprise blockchain platform developed by mega-bank JPMorgan Chase, is being acquired by ConsenSys, writes CoinDesk – the Brooklyn-based Ethereum venture studio. JPMorgan has also made an undisclosed strategic investment in ConsenSys, the companies said in a statement, although neither would confirm the size of the investment the bank is making.
  • With the anxiety of inflation in the air once again, Bloomberg reports that many investors are, unsurprisingly, turning to gold as a hedge. Along with gold, however, they are stashing away bitcoin and even whisky. “Gold, bitcoin – both of them, I think, are protections just against this uncertainty out there,” says Michael Novogratz, founder, and CEO of Galaxy Investment Partners.


  • Research from Peking University shows that over $1 billion worth of tokens on the Ethereum blockchain are missing a software standard released in 2017, writes CoinDesk, setting them up to be hijacked and drained from trading exchanges. The software vulnerability was pinpointed in 7,772 issuers of ERC-20 tokens.
  • Following fraud allegations, South Korea’s third-largest cryptocurrency exchange, Coinbit, has been seized by police. An August 26 report by the Seoul Shinmun says that 99 percent of transaction volume on the exchange was faked through wash trading. According to CoinTelegraph, the police estimate that the fraudulent activities netted over 100 billion won.
  • A whistleblower has been kidnapped in Ukraine after accusing a crypto firm of an exit scam, writes CoinDesk. Prior to going missing, Yaroslav Shtadchenko (an ex-Bitsonar employee) called Bitsonar’s CEO and told him he was going to file complaints about the company to law enforcement in different countries, including the FBI in the United States. On Wednesday, a lawyer of Bitsonar’s founder called Shtadchenko and suggested he “settle the conflict peacefully.” After that – he was kidnapped on his way home.

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Leaders and Laggards

Weekly Performance
Index Close Weekly
10-Yr Treasury Bond 0.72 +0.07 +11.04%
Oil Futures 43.00 +0.42 +0.99%
Hang Seng Composite Index 3,938.96 +129.46 +3.40%
S&P Basic Materials 401.66 +10.60 +2.71%
Korean KOSPI Index 2,353.80 +79.58 +3.50%
S&P Energy 272.48 +1.33 +0.49%
Nasdaq 11,695.63 +430.68 +3.82%
DJIA 28,653.87 +914.14 +3.30%
Russell 2000 1,578.34 +14.04 +0.90%
S&P 500 3,508.02 +122.51 +3.62%
Gold Futures 1,972.20 +25.70 +1.32%
XAU 152.85 +1.97 +1.31%
S&P/TSX VENTURE COMP IDX 745.31 +5.83 +0.79%
S&P/TSX Global Gold Index 382.41 -2.07 -0.54%
Natural Gas Futures 2.66 +0.31 +13.14%


Monthly Performance
Index Close Monthly
Korean KOSPI Index 2,353.80 +90.64 +4.01%
10-Yr Treasury Bond 0.72 +0.15 +25.69%
Gold Futures 1,972.20 -4.50 -0.23%
S&P Basic Materials 401.66 +14.72 +3.80%
S&P 500 3,508.02 +249.58 +7.66%
DJIA 28,653.87 +2,114.30 +7.97%
Nasdaq 11,695.63 +1,152.69 +10.93%
Oil Futures 43.00 +1.73 +4.19%
Hang Seng Composite Index 3,938.96 +195.10 +5.21%
S&P/TSX Global Gold Index 382.41 -13.11 -3.31%
XAU 152.85 -2.85 -1.83%
Russell 2000 1,578.34 +77.71 +5.18%
S&P Energy 272.48 -13.22 -4.63%
S&P/TSX VENTURE COMP IDX 745.31 +34.17 +4.80%
Natural Gas Futures 2.66 +0.81 +43.53%


Quarterly Performance
Index Close Quarterly
XAU 152.85 +34.41 +29.05%
S&P/TSX Global Gold Index 382.41 +56.55 +17.35%
Gold Futures 1,972.20 +229.50 +13.17%
DJIA 28,653.87 +3,253.23 +12.81%
S&P 500 3,508.02 +478.29 +15.79%
Nasdaq 11,695.63 +2,326.65 +24.83%
Korean KOSPI Index 2,353.80 +325.26 +16.03%
Natural Gas Futures 2.66 +0.83 +45.65%
S&P Basic Materials 401.66 +53.58 +15.39%
Russell 2000 1,578.34 +177.66 +12.68%
Oil Futures 43.00 +9.29 +27.56%
Hang Seng Composite Index 3,938.96 +625.49 +18.88%
S&P/TSX VENTURE COMP IDX 745.31 +200.69 +36.85%
S&P Energy 272.48 -19.56 -6.70%
10-Yr Treasury Bond 0.72 +0.03 +4.62%


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Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (06/30/2020):

BHP Group Ltd
Sibanye Stillwater Ltd
Nomad Royalty Co Ltd
Coral Gold Resources Ltd
Brixton Metals Corp
Polymetal International PLC

*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index. The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months. The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange. The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks. The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500. The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period. The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500. The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500. The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500. The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500. The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500. The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500. The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The S&P/TSX Venture Composite Index is a broad market indicator for the Canadian venture capital market. The index is market capitalization weighted and, at its inception, included 531 companies. A quarterly revision process is used to remove companies that comprise less than 0.05% of the weight of the index, and add companies whose weight, when included, will be greater than 0.05% of the index. Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The NIFTY 50 is a benchmark Indian stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange. The MSCI China Index captures large and mid-cap representation across China A shares, H shares, B shares, Red chips, P chips and foreign listings (e.g. ADRs). The MSCI Emerging Markets Index captures large and mid-cap representation across 26 Emerging Markets (EM) countries*. With 1,385 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in December 1966. The Chicago Fed National Activity Index (CFNAI) is a monthly index designed to gauge overall economic activity and related inflationary pressure. The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. A basis point is one hundredth of one percent, used chiefly in expressing differences of interest rates.