murphy metal monday

If you wanna dance, you have to pay the fiddler

Federal Reserve managed interest rates lower, dollar stronger and market bubbles galore appear to be at an end and maybe it’s time the fiddler gets his due. Clearly, the Fed is concerned about runaway inflation and has planned a number of interest rate hikes over the next year. But even the inept Fed knows managing interest rates higher could result in the stock market and economy taking massive hits, so it is doubtful anyone believes the Fed will stick to their guns at the first sign of any major weakness taking place. Besides, as Alasdair Macleod has been emphasizing for some time now, it’s not a strong economy and consumer demand that is driving inflation higher, as the Fed would have you believe. It is the too many trillions of dollars printed out of thin air chasing too few goods resulting from COVID related supply chain issues and now further supply constraints due to sanctions resulting from the Russian invasion of Ukraine.

In addition, Macleod had the following to say, There are enormous strains building in the fiat world, likely to destabilize it. While there is a pause in the increase in energy and commodity prices, lack of supply for the given levels of demand has been exacerbated by sanctions against Russia and the supply disruptions in China of production of consumer goods and shipping lockdowns in Shanghai and elsewhere. Not only are consumer prices set to rise significantly above current CPI levels of 8%, but the pressure for higher interest rates and bond yields have not been factored into the markets. Furthermore, there can be no doubt that rising food prices in the coming months and higher energy costs threaten to be politically destabilizing.”

“Fiat markets are about to be shaken as these realities hit home. Anyone not in the fiat bubble knows that equities will be undermined by a combination of rising interest rates undermining the valuation basis, and the threat posed to economic activity and governments with ballooning deficits. Equities, and presumably bitcoin, which increasingly correlates with them, will offer no inflation protection whatsoever. It is that understanding that’s likely to drive investors to seek a genuine hedge, which can only be gold and silver. Gold and silver are still legally money, which cryptocurrencies are not.”

“It is unclear whether bullion banks fully understand these dynamics. A macroeconomist would say that rising interest rates are bad for gold. A classical economist understands the difference between gold and fiat currency. A trader who is short in the paper markets is likely to be Keynesian and persuaded, against all the evidence, that central bank policies will continue to suppress the gold price. Those of us who understand that the world of paper money and its inflated financial assets is about to be undermined by far higher interest rates and bond yields, just keep stacking and be thankful for the opportunity.”

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The “opportunity” that Macleod speaks of is the unnaturally low manipulated prices of gold and silver. And, the other opportunity that I might add is the actual availability of physical gold and silver. As mentioned last week, this availability might only be a luxury later this year and beyond. Every single day, the supply of physical gold and silver diminishes relative to demand. Rising inflation, a weakening dollar and stagflation in general will be with us for years to come. When the public finally “gets it”, we will experience a gold mania, much like we saw recently with Bitcoin.

In regards to the end of paper gold and silver being manipulated, recently interviewed publisher Robert Kientz expounds with the following:

“The end of the Petrodollar is at hand. Since the early 70’s, this system entailed everyone trading dollars for oil. Now, if you want to buy natural gas from Russia, you have to pay in rubles. Both Russia AND China are basically saying, ‘Screw the dollar. We are going to our own currencies.’ Plus, Russia is pegging its ruble to gold. This is absolutely HUGE.”

“This means COMEX (NY) and LMBA (London) are now losing control of pricing gold worldwide. This is like Russia taking an axe to the dollar tree and the stronghold had by the two exchanges is starting to end. Gold and silver should start trading more freely. The framework is being laid to get out of this control mechanism – opening the door to legitimate price discovery (and sharply higher gold and silver prices).”