Above Ground Gold Supply Is Being Overwhelmed By Demand - Making For A Perfect Storm For Gold Stocks With Gold In The Ground
Winds of stagflation are picking up, of course the financial media talking heads aren’t talking about it, neither are the Fed folks, but nonetheless the trend toward a stagflationary problem is upon us. Gold is certainly trading like investors see it and are preparing for it, and I don't think it will be long before silver starts pricing it in as well. During stagflationary times, gold and silver are the best safe havens by far.
Retail sales in January were down while inflation is ticking up according to government statistics. The spin is that the retail sales numbers were affected by cold weather, whereas I think it has more to do with mass deportations and migrants heading back to Mexico to avoid ICE agents knocking on their doors or showing up at their work.
Taking millions of consumers out of the market has negative effects. One of course is that they shop less. Secondly, it means less workers showing up for work which causes inflation as companies have to increase wages to attract new workers to fill those positions.
Plenty in the MAGA crowd, including Trump, love to cast aspersions on migrants, but they ignore the economic ramifications of mass deportations.
Migrants shop which benefits companies. They also work hard in low paying jobs that also benefits companies and consumers by providing lower cost stuff that companies make money off of and consumers purchase at the lowest prices possible. It is much easier for Trump and the MAGA crowd to vilify migrants than companies and consumers.
It is easy to throw stones at migrants, but the bottom line is that the companies, consumers and the economy are a glass house that will take the damage from mass deportations.
The damage is already showing up with retail sales down, and polling of consumers reveals they are expecting 4-5% inflation in 2025. Meanwhile, even the Fed members that are asked for their forecasts on economic growth and inflation forecast the economy is slowing, while they also see inflation at 3% which is well above their target of 2%.
It seems as though consumers and the Fed members are clearly seeing that stagflation is coming, with the Fed members anticipating that it will only be around 1% and consumers predicting 2-3%. I trust consumers forecasts a lot more than the Fed members because the Fed members live in a world of highly manipulated government statistics.
Consumers don’t have that luxury. They have to go to work and see their purchasing power of what they earn deteriorate due to inflation which they come to terms with every time they buy something. Their handle on the economy is much more accurate because they live in the real world, not the one the Fed lives in with their plotting of highly suspect dots.
Mass deportations have an immediate impact on retail sales and inflation, as does rolling out tariffs. Collectively, they will slow the economy and cause higher inflation which is going to cause stagflation, making a more serious problem in the coming days, weeks and months.
Stagflation is not just an American problem, it is a worldwide issue. Which is part of the reason that gold is having a stellar start to 2025. A key reason that gold had such a spectacular year in 2024 is due to the Death Spiral of Debt.
The combination of the debt crisis made worse by the cost of servicing the debt, plus stagflation concerns are key reasons that I think gold will have a better year in 2025 than it did in 2024. In addition, stagflation will also be very bullish for silver which is one of the most coiled springs in any metal I have ever seen.
The Fed is at a crossroads where they will have to make a decision, to either throw the economy and stock market under the bus, or inflation. I’m certain that they will keep pitching the idea that their rate policy is just right, but consumers don’t agree and ultimately I think as they are grounded in the real economy and that they will be proven much more accurate than the Fed members.
Gold is soundly outperforming the stock market, Bitcoin, Mag 7 stocks and tech stocks in 2025. What this tells us is that big players in America and worldwide are seeing the writing on the wall.
Bitcoin is trading like Dot-com stocks just prior to when that bubble burst. The crypto currency bulls are much like the Dot-com stock bulls, as they don’t think a major correction can happen.
I can see the potential for a major crypto currencies correction when those that bought during the ETF pump, including Michael Saylor, see Bitcoin trade below their average cost of buying it which is around 10% below the current price. If it trades below that, then it could easily trade below the average cost of mining it. Which will cause a cascade of selling because if Bitcoin miners start losing money mining it, then the whole technological backbone of the system breaks down.
The Nasdaq and S&P 500 have been trending sideways for the past couple of months, while the Dow has been trading sideways in February. The Wall Street stocks are priced well beyond perfection and looking like they are facing a year ahead of sideways action with a downward bias. Although that could change if the Fed throws them a bone with lower rates. It is not clear if they will get that relief as inflation is kicking in and that will probably keep sentiment for a rate cut off the table until late in the year.
All of these issues from throughout this report are flashing a green light for gold with a potential that silver could get rolling this year as well.
With the powerful start to 2025 for gold, plenty of investors are paying attention, even some in the financial media. The speculation is that tariff concerns are why gold is flying out of London to New York. That answer doesn’t make much sense to me because Trump hasn’t mentioned anything about putting tariffs on gold.
Another reason some are giving is that Treasury Secretary Scott Bessent is planning to revalue gold from its current price on the books of $42 per ounce to current levels. It makes sense, but the reason I think it has been valued that low for so long is because they don’t have as much in the vaults as advertised, and that a bunch of it is lent out to back up the highly leveraged paper trades.
To revalue the gold would require an audit, and that would force them to come clean on what is really in the vaults. They should, because having it on the books at such a low value doesn’t make any sense.
Why they won’t is because to make it realistic they would have to audit it and also do some pinhole sampling to run assays on it. They should let Ron Paul run the audit and assaying, but I’m not holding my breath that Ron Paul or anybody will be doing any auditing to get to the bottom of the amount of gold in the vaults.
What I think is driving gold higher in 2025 is that all the central bank buying over the past few years to protect against the Death Spiral of Debt and destruction of purchasing power of fiat currencies has drained the above ground supply of physical gold. In addition, big players in America have figured it out and are demanding delivery of physical gold behind their paper trades.
The central bank buyers and delivery requests are putting serious strain on the above ground physical supply. Which has overwhelmed the supply and is going to drive gold much higher.
What has me extremely excited is that I have been noticing that as the above ground supply is tightened to unprecedented levels, the gold miners, gold mine developers, and gold explorers with important discoveries are having their gold in the ground priced in a more bullish fashion.
Several of the companies featured in our reports are seeing significant breakouts all along the food chain. We didn’t see that happen in 2024 as they had come off a bear market that had lasted for a few years around the middle of February. With it mostly affecting the best in breed gold miners, and a small group of developers and explorers.
For the gold stocks in 2024, it was more like a cup is half empty turnaround in the stocks. But, this year I am seeing it spread out. I’m also very impressed that it isn’t really a rising tide lifting all boats trend, it is much more selective with best in breed gold miners, developers with high-quality projects and explorers with important discoveries.
In my next report, I have 10 companies that have been featured in past reports that have made impressive breakouts in 2025. They include major miners, developers and explorers.
What I am seeing is that as the above ground gold supply is getting tighter by the day, investors are starting to price gold in the ground in a much more bullish fashion. Which is the perfect storm for gold and the gold stocks to have a wonderful 2025.
All the best,
Allan Barry Laboucan
