Gold: Will Stimulus Reach 10% Of GDP Under Biden?

Fundamentals

We believe that gold is going to go much higher. It should adjust to the relative volatility of Bitcoin, stocks and crude oil. The commodity markets are starting to explode. We have yet to see how fast commodity prices are going to affect the mainstream economy. Soybeans are trading at around $14 from a low of $8 a bushel just a few months ago. Those prices are yet to be reflected in retail prices. Government statistics do not include energy and food, which are considered short-term anomalies. However, these prices are not short-term anomalies. They are intermediate- to longer-term problems. The lockdown globally and locally has destroyed the supply chain. We are using current inventory and, when those supplies are used up, then prices will rise rapidly. Real estate, which uses lumber and various metals and basic commodities, has seen an explosion in prices. Inventory is very low. So there's an anomaly between where prices are and the rising cost of the inputs. The US dollar continues to lose value as more stimulus is added to the economy, which leads to inflation. In the supermarket, products are being sold in smaller amounts for the same price, which is helping to hide inflation.

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We could be reaching 10 percent of GDP just on stimulus, which is $23 trillion or more. These are staggering numbers. We have to support main street and get the economy going, but that stimulus will lead to inflation. Now we have vaccine issues in terms of who gets it, distribution and availability. Politically, we appear to be moving into extremes to the right and left as the economic system collapses - although the new President Biden may achieve some stability and unity.

The key positive factor for the US is that the dollar is the world's reserve currency, so we can print as much currency as we want. Others cannot do that. The percentage of reserves held in the US dollar has been in decline for decades, but it's still the world's major reserve currency. This system has benefited a handful of billionaires, but has hurt Main Street, the middle class and the poor. We have the largest wealth disparities in US history, and based on history, it cannot last. Change is coming. The pandemic took the veil off what was already a failed or weak system that was full of debt. Central bankers today do not have any room to manipulate interest rates anymore. With global record debt, they cannot raise interest rates. With a global lockdown, which has closed almost every sector of the economy, they cannot raise rates. Now trillions of dollars in spending is talked as if it is almost nothing. The key is to look for ways to protect yourself. Gold and precious metals can be critical to retaining your lifestyle and supporting your family. Gold and precious metals have been valued for centuries.

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Disclosure: I am/we are long GDX.

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