Gold Goes Down As Stagflation Rears Its Ugly Head Which Is Extremely Bullish For Gold
Heads gold wins, tails gold wins.
Earlier today, gold got smacked down, the worries being that the economic numbers are showing persistent inflation, while also showing that the economy is slowing. So that suggests we are in a stagflation scenario. The last time this happened was extremely bullish for gold. We are certainly living in strange economic times.
Tomorrow’s meeting of the Fed will be interesting as they have to stickhandle very carefully. They sound too hawkish and that will signal they are comfortable with pushing the economy into recession and that stagflation is okay. If they sound dovish, they are signalling that they lost the war on the inflation that they caused.
Meanwhile, the politicians will keep spending and day by day make the Death Spiral of Debt worse. They don’t really need an election year to spend like crazy, they do it every year, but with an election around the corner they will amp it up.
Although it shouldn’t surprise me, it still does, that no politicians are talking about the need to slow spending. When in reality they actually need to slash it dramatically. But alas, that doesn’t secure votes, so they will go on their merry way of spending like they have an unlimited credit card.
Even if the payments on that debt is now over $1 trillion and well on its way to $2 trillion as debt gets rolled over (at much higher rates) from the Free Money Era after the 2008 GFC.
The Fed surely won’t raise rates tomorrow, although there are sound economic arguments that they should raise them to fight inflation. The fact that they don’t is their admission that all their efforts to stop inflation haven’t worked, they have lost that war.
I expect they will be somewhat hawkish and dovish in the press conference after they announce they aren’t raising rates at this meeting. Basically, because they have to as they are looking at stagflation straight in the face.
Nothing has changed today regarding the reasons to be bullish on gold. The Death Spiral of Debt has paved the way for a return to the Gold Standard.
Heads gold wins, tails gold wins.
All the best,
Allan Barry Laboucan
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