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Commodity Trade Mantra: Gold and Silver need to get Insanely Expensive before this Rally Ends

Article by CommodityTradeMantra  

The US Dollar Weakness leads Rally in Gold and Silver

There are just two themes one needs to know to explain the current (manipulated to a never before seen extent) market: the Great Repression and the Great Debasement.

First the Great Repression – also known as “Don’t fight the Fed” –  which according to BofA CIO Michael Hartnett is the outcome of $8 trillion in central bank asset purchases in just three months in 2020, has crushed interest rates, corporate bond spreads, volatility & bears. The most perfect example of this repression: the US fiscal deficit soared from 7% to 40% of GDP in Q2’20, and less than one month later the volatility of US Treasury market fell close to all-time low.

When the only reason to be bearish is there is no reason to be bearish – that’s when you sell. And sure enough, recent market moves justify getting defensive: the global equity market cap has round-tripped from $89tn to $62tn back to $87tn, with BofA warning that it is “hard to see financial conditions getting incrementally easier in July/Aug period of “peak policy” stimulus; summer dip in risk assets (e.g. SPX to 3050) likely.”

And yet, all good times come to an end – otherwise the Fed would have printed its way to utopia decades ago – and the with Great Repression in full force, it also means that the Fed is currently pursuing a just as Great Debasement.

Echoing something we have also said, namely that with the bond market now nationalized by the Fed and no longer providing any useful inflationary (or deflationary) signals, the only remaining asset class with any sort of discounting qualities is gold…

Interest rate repression means “investors can’t hedge the inflationary risk of $11tn of fiscal stimulus via “short bonds”…so investors crowding into “short US dollar”, “long gold” hedges.

That leaves long gold as the only natural hedge to the central bank “all in” bet of kicking the can until something breaks. That something will likely be gold exploding higher first above $2,000… then $2,500… then $3,000 at which point the Fed’s control over fiat currencies, as well as the illusion that there is no inflation, and the financial regime will finally collapse. – Zerohedge

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Although the information in this commentary has been obtained from sources believed to be reliable, The Gold IRA Company does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. The Gold IRA Company will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.