Precious Metals Update
The U.S. central bank in the squeeze
They are trapped. Not only that the central bank sits generally in the zero-interest trap, no also the planned interest increases in the year 2022 are no longer safe. Like in a bad mafia movie, the market is currently showing the Fed that it had better continue to provide cheap liquidity, otherwise it will crash. And it could indeed, the economic figures are already not entirely rosy. In addition, the mid-term elections are in the US this year. Historically, this means the end of QE and quantitative tightening. Thus, one can definitely be prepared for one or two interest rate hikes. But the easy times of this bull market are over.
Gold, the seventh sense of the financial markets
The year 2021 was extremely depressing for gold investors. Our thesis is that gold in some white anticipated the extreme measures of the pandemic and accordingly already distinguished itself with good performance at the beginning. But what about now, the central banks are not likely to switch to austerity now. Well, no, but the current system can go on much longer without running into too many problems. Gold will probably be revalued at some point in the future. But only once. Moreover, we expect new all-time highs this year as the market realizes that the rate hike cycle will be the shallowest and shortest in history.
Inflation and velocity of money
Inflation is back. If the stock market continues to deteriorate, it is fairly certain that central banks will intervene to save it. But in doing so, they risk raising inflation dramatically. In the last few years, this did not matter much, as inflation was very low anyway. But in the meantime, it is there and the problem has not even occurred yet. Moreover, Omicron probably represents the turning point. The velocity of money in circulation should stabilize. If it is currently still at an all-time low, it could soon go up rapidly. Importantly, velocity of circulation is one of the factors behind higher inflation.
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