Gold’s fundamentals are looking better every day.
After years of low gold prices, the supply of gold hasn’t grown.
All the while demand has boomed. . .
Why wouldn’t it? Imagine if your favorite store had a clearance event for a product you loved.
Wouldn’t you take advantage of it?
Well, the Russians and Chinese certainly are—they’ve been buying gold hand over fist.
And showing no sign of slowing down. . .
It has been documented that gold refineries are working around the clock to meet physical demand.
Private bullion continues to flow from commercial bank vaults and into central bank vaults – mostly foreign.
This has been reducing the floating supply of gold available.
Said simply, the gold market supply situation is in a tight spot.
If a sudden shake up happens and physical gold is needed fast – I don’t know if it will be readily available.
Well, it will be. . .
But not anywhere near the current $1,300 an ounce.
Try over $2,000. . .
This is economics 101. If demand spikes and supply is flat, prices will keep rising to incentivize others to sell their product or produce more of it.
And with how the physical gold market is today, don’t be surprised to see gold price spike.
But will there be a sudden grab for gold?
There are many potential catalysts. The more the U.S. strains its relationship with Russia, the more gold they’re buying and diversifying from the dollar. Same with China. And Iran.
War with North Korea is looking more likely. Neither side is willing to give in, making a clash of some kind seemingly inevitable.
Saudi Arabia’s government purge and deepening crisis with Iran is becoming worrisome.
But, these still aren’t the main reason to be bullish about gold.
There is one big, main driver.
And that is the Federal Reserve. . .
Just by looking at the core-PCE deflator (the Fed’s favorite metric to gauge inflation) year-over-year, it shows that their 2% inflation target is a pipe dream:
The trend is for deflation to continue, not inflation.
And because of this, gold is positioned to gain.
Why? Because the Fed will not allow deflation.
It’s that simple. . .
We have heard every central banker worldwide talk about this.
“Deflation cannot be tolerated. Falling prices will be battled. And we will do whatever it takes to prevent this outcome.”
The U.S. dollar has been in steep decline since 2017 began.
And this is just the beginning. . .
All these factors combined……we’re positioned perfectly for the next multi-year rally of the yellow metal.
Christoph Grizzard, The Fat Cat Investor
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