Gold: We Appear To Be Heading Inevitably Toward Inflation In 2021

Fundamentals

Given the economic, health and political crises occurring, it does not make sense that we are seeing record levels in the stock market. Therefore, it's extremely difficult to use the analysis of fundamentals to trade the markets. The market is looking ahead. The market is focused on the economic recovery that has been starting a little. We are at a bottom economically, so almost anything looks good in comparison. Major fiscal issues including interest rates need to be resolved. We also are facing massive debt that has reached staggering levels. It will need to be addressed at some point. Leaders do not appear to be showing any inclination to change current policies of printing record amounts of money to stimulate the economy, not only in the US but on a global basis. Debt is going to increase even more. We do not yet know the consequences of the pandemic and the printing of money, but the stock market appears to be discounting the effects of the pandemic and the massive stimulus.

We appear to be heading inevitably toward inflation. Food prices already have increased 50% or 60% since March 2020, in terms of futures for corn, soybeans and such. Prices in retail food stores already are going up. The new US administration appears to be set to continue to provide massive stimulus or quantitative easing. According to the latest Fed meeting notes, interest rates remain unchanged. They cannot change them. It's the only way they can finance the debt. If interest rates rose even a decimal point, the debt payments would lead to extensive defaults around the world. There's no sign that the Fed is planning to raise interest rates at any point in the foreseeable future.

The US dollar’s value in international markets may be affected by the US debt levels and amount of stimulus. China, Russia and Saudi Arabia already are using other currencies more and more as reserve currencies instead of the US dollar. The purchasing power of the US dollar has fallen almost 100% since going off the gold standard in 1971.

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