We believe a gold secular bull rally is underway.
An article entitled “Great Gold Rally,” in August 2019, was bullish on gold and two years on, we are even more bullish on precious metals, particularly gold.
The writing is on the wall, a gold secular bull rally is likely underway and gold could be about to head another leg higher shortly
So here is our rationale why we believe a secular bull rally is underway.
Since that article more than two years ago, the money supply M2 has exploded higher. Meanwhile, pandemic and global lockdowns negatively impacted economies. We are continuing to feel the supply shocks.
“a gold secular bull rally is likely underway and gold could be about to head another leg higher shortly”
WEALTH TRAINING COMPANY
So, to give you some idea of the growth in the Fed’s central bank money creation since the pandemic, here are some interesting figures to mull over.
The Fed’s total assets were 4.1 T dollars in January 2020, and in August 2021 it is 8.4 T dollars.
Put another way, in the last eighteen months the Fed has created 4 trillion USD, which is unprecedented in history.
Stagflation is a reason why the secular bull run in gold could be underway
Despite the trillions of dollars of money creation from the Fed and its other western aligned sidekicks, the ECB, BoE, and BoJ the economic needle has hardly moved.
The post-pandemic boom recovery with all the so-called pent-up demand is over as the world’s largest economies start experiencing deaccelerating economic growth.
The growth forecast for the two largest economies, the US and China have been revised downwards.
“Despite the trillions of dollars of money creation from the Fed and its other western aligned sidekicks, the ECB, BoE, and BoJ the economic needle has hardly moved”
WEALTH TRAINING COMPANY
US GDP is projected to grow by 6.9% in 2021 and 3.6% in 2022. Meanwhile, economic activity in China will reach 8.5% this year and 5.8% in 2022.
But surging prices are starting to bite. For example, US core inflation has hit a 29-year high of 5% in May. China’s factory-gate prices rose at the fastest pace on record. China’s official producer price index (PPI) rose by 10.7 percent in September. German inflation also hit a 29-year high of 4.1%.
“Rising 10-year yields affect the cost of borrowing for businesses and households” – Wealth Training Company
But with so much debt in the system due to massive government borrowing during the lockdowns the Fed will be under pressure to keep the treasury 10-year yields suppressed.
Rising 10-year yields affect the cost of borrowing for businesses and households. Furthermore, and meaningful increase in the 10-year yield could send asset prices crashing, bearing in mind most assets are purchased with borrowing.
So the stars are aligned for a secular gold bull rally
Structural unemployment due to fourth revolution technologies is a macro trend that lowers worker participation rates. Universal Basic Income could be what comes next. In other words, the government deficit could go much higher with the central bank buying the debt. Put another way, the Fed balance sheet is likely to continue spiraling, which will lead to further currency debasement.
Meanwhile, the Fed will keep rates and yields suppressed.
So gold is a long-term inflation hedge against spiraling government debt and a debased currency.