Gold: Inflation Is Here To Save The Nation From Deflation

Fundamentals

Precious metals settled higher on dovish central bank comments. Wednesday, February gold was up $10.70, while March silver was up 13.7 cents. Global central bank officials made dovish comments and there was safe-haven demand as the US reported a record number of COVID-19 deaths on Tuesday. A rally in stocks and a strong dollar limited the rise of precious metals. Global economic data was bearish for precious metals, especially for silver, which is an industrial metal. Eurozone industrial production rose 2.5% month to month, stronger than expectations. It was the biggest increase in four months.

Fed comments and Eurozone central banker statements have been bullish for gold. They have been dovish in relation to their 2% inflation goals, which is bullish for precious metals. The real inflation rate is more like 10%, if you count food and energy, according to Shadowstats.com. However, Wednesday’s US economic data was bearish for gold, as it appeared that there's no inflation and that it's under control. Official inflation data does not count food and many other key parts of the economy. The government also doesn’t want you to pay any attention to the debt. The debt bubble is close to collapsing. If interest rates rise, debt defaults are going to be a tsunami through the global economy. If inflation rises above 2% based on Fed data, they will use the yield curve by capping long-term interest rates to seek to control the effects of inflation. The market and the Fed know that we need inflation in the system to get out of this recession and to deal with the mountains of debt.

Gold also has support from the worsening COVID-19 pandemic. The economy is on lockdown, so there's little economic activity. This hurts industrial metals, such as silver. Silver, however, is not just a commodity. It's also a safe haven asset in times of economic chaos, especially when the US dollar is being devalued through inflation. The US is reporting record death levels from COVID-19, while the UK and Japan are facing surges in cases and more stringent and broader lockdowns.

1 2 3
View single page >> |

To learn more about how the VC PMI works and receive weekly reports on the E-mini, gold and silver, check us out on Ticker ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.