Big Inflation Will Spur Gold
The comments below are an edited and abridged synopsis of an article by Adam Hamilton
Gold demand should be soaring with inflation raging, yet it has lagged fast-rising general price levels, confounding contrarian investors. But history argues this anomaly won’t last, that eventually big inflation will spur gold. The recent inflation spike, fueled by Fed money printing, is the first since the 1970s, when gold rocketed up by multiples.
Hamilton discusses the Consumer Price Index; the Fed and dismissing inflation; ‘Inflation is always and everywhere a monetary phenomenon’; extreme money printing as inflation’s catalyst; inflation will continue raging until the majority of QE4 monetary injections are drained back out via QT2 bond selling; raging inflation and a soaring gold price; a stock market bear; gold – for the moment – is a buying opportunity; gold nearly tripled in the first inflation spike after the US dollar was severed from the gold standard in 1971; and downplaying inflation doesn’t change the reality Americans (or Canadians) face.
The bottom line is that today’s inflation will spur gold investment demand, driving gold much higher. This first inflation super-spike since the 1970s is fueled by the Fed’s extreme QE4 money printing. That effectively more than doubled the US-dollar supply in just a couple years, forcing general price levels way higher. While QT2 is getting underway, even at full-speed just half-unwinding QE4 will take over two years.
And all that monetary destruction will hammer stock markets into a major bear and force the economy into a severe recession, so the Fed will likely capitulate early again. Either way, high inflation will persist for a long time with most QE4 money remaining in the system. After nearly tripling then more than quadrupling during the last inflation super-spikes in the 1970s, the prevailing gold price should at least double this time around.