Commodity Trade Mantra: Powerful Forthcoming Rally in Gold and Silver Ensured by Weakening Dollar & Rising Inflation
By: Christine von Liederbach
September 15, 2020
Article by Stefan Gleason and Neils Christensen in Commodity Trade Mantra
Gold and silver prices are modestly up in midday U.S. trading Thursday. The Fed is monetizing debt on an epic scale, through which it increases the quantity of money heavily.
The increased quantity of money will, sooner or later, most likely to be reflected in higher prices: be it consumer and/or asset prices.
The debasement of the purchasing power of money
As long as central banks continue with their inflationary scheme, the savvy investor has good reason to consider keeping gold as part of his/her liquid means because the purchasing power of gold cannot be debased by central banks printing up ever greater amounts of currency
. And unlike bank deposits, gold does not carry a payment default risk
. At current prices, we believe gold offers an attractive risk-reward profile, meaning a significant upward price potential that comes with a limited downside price risk.
Equity market turmoil is supporting gold’s role as risk diversifier
. Central banks remain dovish, with interest rates expected to sit near zero. Ongoing quantitative easing should support investor demand. Gold remains an attractive investment, as the recent price setback is likely to be short-lived.
Gold and Silver stand to gain
Since posting new record highs in early August, the gold market has consolidated above $1,900/oz support.A move back above $2,000/oz would likely be followed through to the upside with a rally to fresh highs. Silver, in turn, could be expected to run to new multi-year highs above $30/oz.
The relentless mega trend of dollar depreciation (i.e., inflation) ensures hard money will gain value versus fiat Federal Reserve notes. Inflation rates may be set to accelerate as the Fed aims for an “average” of 2%.According to central banker logic, this requires pushing inflation above 2%
for an unspecified period. Holders of low-yielding U.S. dollar-denominated debt instruments should be quite concerned about the prospect of losing purchasing power
Chinese economist Xi Junyang
announced last week that the country would aim to hold $800 billion in U.S. debt “under normal circumst
ances.” But, he added, “China might sell all of its U.S. bonds in an extreme case, like a military conflict.”
If major world powers dumped their Treasury holdings and stopped accepting U.S. currency in international trade, the U.S. dollar’s privileged status and value would collapse. Of course, gold and silver stand to gain against….
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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.