Gold Advances as Investors Sort Out The New Economic Mix
The comments below are an edited and abridged synopsis of an article by USA Gold
Gold advanced in early trading on June 6 as investors continued to sort out the combination of quantitative tightening, runaway inflation, and a possible recession—what many see as a paradigm shift in the investment climate. The usually reserved Jamie Dimon, JPMorgan’s CEO, warned yesterday of an impending ‘economic hurricane’ driven by war in Ukraine and Fed tightening. Gold was up $11 at $1,860. Silver was up 34¢ at $22.23. Incrementum, the Austrian-based financial firm, addresses what it calls ‘monetary climate change’ in its recently released In Gold We Trust tome.
“Monetary policymakers,” it says, “therefore have their backs to the wall. They are forced to at least pretend to face the [inflation] wolf. However, tentative attempts to stem the tide of liquidity are beginning to expose problems that have been masked for years, if not decades, by emergency measures. Just as in 2018, when we warned of the inevitable consequences of the attempted turning of the monetary tides, we are now issuing another explicit warning. In addition to wolfish inflation, a bearish recession now looms.” It foresees Stagflation 2.0—a repeat of the 1970s, which was a nightmare for the typical 60% stocks, 40% bonds portfolio and a boon for gold (see chart included).
“Gold,” it says, “will therefore remain an indispensable portfolio component in the future, allowing investors to sleep soundly in stressful situations in financial markets.”