Mission Unstoppable

April 29, 2024 by

Simon Phillips in Blog

It seems that mainstream media outlets and Western .gov cheerleaders just can’t put a finger on reasons for the dramatic increase in the price of gold over the past 2 months. Mercifully, a little profit taking is allowing them time to collect their thoughts and we’re here to help. There’s no such confusion for long term readers of these pages. The fact that most investors and mainstream media are still confused as to the why and how to position investment portfolios in precious metals is a great sign for existing investors.

A big question has re-emerged in financial markets – will central banks raise rates to combat “sticky” inflation, trashing the economy and asset prices in the process, or just print more money to combat falling growth, turning an inflationary creek into a raging torrent of inflationary currency destruction? Hell of a choice.

The US, the Eurozone and Japan are already burdened with an untenable cost of servicing existing debt and loan-dependant industries teering on the brink. In the US for example, once 10-year treasuries go above 5%, the bond market enters especially dangerous territory, endangering industries like the automotive market and commercial real estate that depend heavily on debt. Just last Friday (always a Friday) Philadelphia’s Republic First Bank was the first US bank failure of the year. A wake-up call? Will the US Fed raise rates with this backdrop, in an election year? They’ll shudder at the thought of the violent stock market reaction should someone utter a “hike” call. So, more inflation it is.

Inflation, caused by central bank profligatory behaviour, facilitating economically unproductive spending, unrelenting systemic bailouts, massive increases in welfare, ESG boondoggles, climate change virtue signalling, diversity programs and all leading to much bigger government and choking regulation. We wonder if the “go woke go broke” mantra is properly understood in this context.

Those feeding off this system understandably believe there is always another boondoggle to feed off just around the corner. Times up folks, welcome to reality, how’d you like some economic weakness with that inflation? They call that stagflation in the real world, that is rising inflation and falling economic growth, a concept we’ve referred to many times in these pages on Aurum Eco website.

So bad are the inflation numbers that .gov’s across the globe can no longer manipulate inflation numbers to tell their populations it’s not happening. When the blessed aren’t buying the transitory inflation story governments have a real problem, especially in countries conducting “elections” this year.

Setting the pace is the US, with a budget deficit running at 6% of GDP, a record high level outside of traditional war and recession. Could team Biden even recognise inflation or admit to war whilst racking up a mind blowing 1TRILLION dollars of debt every 90 days at the current rate?

Still wondering why investors have chased gold over the last 8 weeks or so?

Sovereign wealth funds and central banks have suffered very little confusion, slowly increasing their gold holdings across 2022/2023 and 2024, accelerated by the US led freezing of Russian reserves in Feb 2022. And these major entities aren’t looking for ETF’s or other derivatives for gold exposure. They want the real thing, as the chart below demonstrates.

You can rest assured that the financial malarky of the last 50 or however many years has a day of reckoning. It’s just impossible to put a finger on the event, or maybe just a gradual rise to a hyperinflation burn, as we’ve been treating as a base case for the last 15 years. Let’s not forget, the chance for any form of financial reform was lost in 2008, instead, decisions were made to preserve the financial system, whatever it takes.

And it’s taken everything.

Now here we are, bigger government, bigger deficits, gigantic debts, even bigger wars, and quadrillions of “all netting out derivatives’ with no collateral. Central Banks, Sovereign Wealth Funds, Asian and Mid East investors aren’t waiting around for an “event”, its already here and the gold market has awoken!!