Precious Metals & the Market’s ‘Dangerous Game of Chicken with Economic Reality’
The comments below are an edited and abridged synopsis of an article by Alasdair Macleod
“It is like a game of chicken: investors riding a Vespa scooter flat-out in the middle of the highway, facing the oncoming juggernaut of reality from the opposite direction. We know what the result will be, because we have seen it before. And we know who gets killed.”
“This article is not aimed at those riding the Vespa: being committed to do or die, they are in a mental zone from which logic is excluded. It is for those who know or suspect that the monetary and economic situation is serious and getting more so by the day. It is for those who know why an accelerating debasement of fiat currencies is now inevitable.”
Growing evidence of an economic downturn despite unprecedented monetary inflation since Lehman in 2008 means a new credit and systemic crisis is becoming increasingly certain. In an attempt to prevent a new crisis developing, this time the scale of monetary inflation by the authorities will have to be even greater. The rise in the gold price since December 2015, and its break-out from a three-year consolidation period earlier this year, confirms that the risks of a credit and systemic crisis undermining fiat currencies have been increasing for some time.
It is now likely that, in the future, portfolio managers will increase their investment allocations in favour of gold, and actively consider investing in silver and platinum as well. It is in this context that this article looks at the price relationships between the three precious metals and their relevant monetary and investment characteristics.