Thursday, April 26, 2018

Gold's favorite historical catalysts of inflation and higher oil prices appear to be signalling that higher metal prices may be just around the corner

While it is a given that price suppression and manipulation in the gold and silver markets is a fact of life, it is also correct to say that central and bullion banks cannot keep prices down forever.  And most often the biggest catalyst for gold moving higher is a rush by investors into the metal as a safe haven asset.

Which is why today it is more important to watch fundamental indicators in the markets more than it is to study technical trends.  And with the 10 year Treasury closing above 3% yesterday, and oil prices starting to break out of a six year bear market, the return of inflation appears to be very real, and is historically the launching pad for investors to suddenly rediscover gold as a primary safe haven.

When gold prices are high, major mining companies scramble for new discoveries.
Eventually when they start mining those deposits, though, the supply of gold increases, pushing prices down. 
As the price falls, the miners’ profit margins fall, which causes investors to lose interest and the miners to reduce production. 
This causes supply to fall, prices to increase, and the cycle starts all over again.
In a way it’s almost comical. And that brings us to today. Well, technically yesterday. 
We’ve been seeing for more than a year that interest rates have been rising. 
Yesterday afternoon the yield on the 10-year US Treasury note surpassed 3% for the first time since 2014. 
And oil prices have been rising steadily as well. 
Financial markets don’t like this combination– it means that inflation is coming. Big time. And stocks plummeted worldwide as a result. 
Now, that immediate reaction was probably a bit too panicky. 
But the deep concern that inflation is coming (or has already arrived) is completely valid.
Inflation is a HUGE problem. And the traditional hedge in times of inflation is GOLD. 
But remember– new gold discoveries have collapsed in the past 15 years. 
And, as Lassonde said above, there are few discoveries on the horizon to make up the difference. – Sovereign Man


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