Gold: Inflation May Be Our Salvation

Fundamentals

The effect of the stimulus on the economy and the US dollar and other currencies is bound to be inflationary. The pandemic caused global economic chaos. Now governments have to print as much money or stimulus as the economy requires to avoid an implosion of assets, which could trigger a horrendous depression. We are in something similar to the 1929 crash. The difference now is that we were able to transition into a virtual economy.

Governments also are having to deal with the increasing wealth disparity between those who benefited from the old system and those who did not. The wealthy have benefited from borrowing money at almost no cost with interest rates at almost zero and buying assets, which then increase in value in part due to the decreasing value of the dollar. This is the fuel that's changing the price of many assets. Printing so much money is inflationary and inflation already is hitting many commodities. Crude oil is above $63 a barrel. In March, we were at negative - $37. Wheat and grains also are up significantly. Central banks appear to be looking for some inflation to get us out of this potentially deflationary spiral in world assets triggered by the pandemic. We are not seeing real growth, but monetary policy triggering artificial inflation of assets. We expect to see an accelerated rate of inflation. Unemployment is still high. Supply chains are broken or stressed, which when demand increases, will further increase prices. We're also running low on supplies of silver and many other commodities compared to the increasing demand as the economy begins to restart. Inflation may be our salvation. Inflation may be the way everyone pays for the damage caused by the pandemic and for past monetary policy mistakes, which included governments taking on huge debt and printing more and more money.

In 1971, gold went from $35 to $800 after the US dollar was taken off the gold standard. Interest rates in the 1970s hit 14%. Inflation also hit new highs at the same time. We may face a similar situation in the near future. We already see short-term interest rates rising. It's a warning of inflation to come. Assets to own at such times are precious metals, such as gold and silver. The precious metals are extremely bullish - more than we have ever seen. Fundamentally and technically, gold and silver are undervalued, oversold and are highly likely to move up significantly. Precious metals tend to go up when everyone has given up.

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