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LAWRIE WILLIAMS: Another volatile month for gold, equities and bitcoin

01 Jun 2022

 Like April, May has brought little cheer to the equity markets with inflationary pressures, and the Fed’s measures being taken to try and control them, seeming to be inevitably driving the U.S. economy into a period of stagflation, possibly even to be followed by recession.  Even the dreaded prospect of a depression to match that of 1929-30 is on some economists’ lips.  Equity prices are down quite heavily year to date, but are continually being buoyed up by, in our view, unjustified bullish comments from Wall Street analysts keen to maintain business.  Such is what passes for market analysis!

Stagflation, though, is also a word on many lips.  It is defined as a period of stagnant growth coupled with high inflation, usually triggered by a sharp rise in energy prices – much as we are seeing today.  The fall in unemployment as the U.S. economy began to recover from the Covid-19 pandemic tended to counter this trend, but there is some evidence that this is beginning to turn around again as inflation eats into disposable incomes and consumer spending begins to turn down cutting demand for goods and services.  Whether this turns into a full-blown recession is rather less certain, however. 

The various movements in prices and indexes over the year to date and the past month are set out in the table below.  As can be seen most have trended downwards sharply since the beginning of the year with some notable exceptions, although we don’t expect these to be sustained.  Overall movement in the market indexes in particular over the past month seem to have been somewhat muted, or even positive, despite some very sharp interim falls, but again we don’t expect the occasional index recoveries to be sustained unless, of course, the Fed does reverse its tightening and interest raising programmes which some analysts see as likely before the year-end.

Markets Performance past month and year to date (closing data)


Dec 31st ‘21

May 30th

April 30th

Change ytd






S&P 500










Nikkei 225 (Japan)





USDX (Dollar index)





DAX (Germany)





FTSE 100 (UK)





Bitcoin (BTC)





Gold ($/oz)





Silver ($/oz)





Platinum ($/oz)





Palladium ($/oz)





Copper (c/lb)





Oil – ($/bbl)





Natl. Gas ($/MBtu)






The various inflation indexes suggest that inflation levels may have eased, marginally, but not sufficiently to suggest an actual prolonged downtrend.  The latest such to be announced, the Personal Consumption Expenditure Index (PCE), the Fed’s preferred measure – the cynics might say because it presents the lowest inflation figures  - came in at 6.3% year-on-year for April, the same level as February and down from 6.6% in March, but although equities moved higher, gold also moved up a little and it was felt that it would have no impact at all on the Fed’s likely move to raise interest rates at the next Federal Open Market Committee meeting (FOMC)  in a couple of weeks’ time.

Past evidence suggests that recession does not usually follow a period of stagflation.  But a programme of 50 basis point interest rate increases at successive FOMC meetings, as the Fed seems to be planning,  may be sufficient to trigger sharp falls in  equity prices across the board and be instrumental in tipping the whole U.S. economy into a recessionary downwards spiral. 

Equity downturns can be sharp and severe as we saw in the middle of the past month when the Dow lost over 2,000 points over a 3-day period.  Even though we have seen partial recoveries in equities since, similar sharp downturns can’t be ruled out in the weeks and months ahead.  A fall in the Dow to below 30,000., the S&P 500 to under 3,750 and the NASDAQ to less than 10,500 over the next month or two cannot therefore be ruled out.

Precious metals seem to have made something of a recovery, but not yet a significant one.  Gold moved back above $1,850 at the beginning of the past week, but in a take-down on Tuesday due to some better consumer confidence figures, it was even unable to hold on to this level, while silver continued to disappoint its followers and the pgms continued volatile.  We suspect consumer confidence will dissipate as inflation is seen to be continuing and gold, in particular, should recover any lost ground.

Precious metals stocks have tended to outperform their respective metal prices, but only marginally so.  Certainly the major precious metals miners should be making strong profits at current metal price levels.

The wild card here seems to be dollar strength.  A strong dollar tends to lead to a weaker gold price in U.S. dollar terms, and the dollar has tended to move upwards against competitive currencies in recent weeks despite the apparent weakness in the U.S.  economy.  This may not necessarily continue and there were some signs of a developing dollar downturn towards the end of the past month.

Data released during the month suggested that U.S. Q1 GDP turned negative and the latest projection by the Atlanta Fed is that the Q2 GDP growth estimate has shrunk to a mere 1.8%.  Given how unexpected the Q1 fall was it might be no surprise if the Q2 figure ends up flat, or even negative too, and if the latter would tip the U.S. economy into a technical recession.  We don’t necessarily expect that this will happen, but investors should perhaps be prepared for the possibility and any negative market fallout resulting.

There is some speculation also that China and Russia, as the world’s top two gold producers by some estimates, may be attempting to introduce a gold-backed global reserve currency to rival the dollar’s current dominant reserve status. Should this speculation be accurate, and a new such reserve currency find acceptance, then the dollar could well enter a period of value decline globally, which would certainly benefit the gold price, at least in dollar terms.

Inflationary trends seem likely to continue to influence equity and precious metals markets despite proposed Fed actions on tightening and interest rate rises.  Markets are thus likely to remain volatile as they have been over the past couple of months and will be moved up and down by data releases seen as positive or negative.  Equities and bitcoin may well thus continue depressed overall, while gold, in particular, may catch an upwards bid as markets consider the underlying trends.  However, uncertainty will likely continue to reign until we see a definitive move by one or other of the key market components.

01 Jun 2022 | Categories: Gold, Silver, China, Dollar, US, Russia, FOMC, Platinum, Palladium, Bitcoin, inflation, stagflation

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