Shortages, Mine Closures and Helicopter Money
These are interesting times…
We see mine after mine getting shut down due to the Corona Virus while some of the largest gold refiners in the world have also shut down. This is of course a limiting factor to the physical gold supply. Furthermore, it happens when gold and silver are completely sold out in many places in the Western World.
If that wasn’t interesting enough, we saw FED come out and basically announcing “QE infinity”. This is unprecedented money printing happening before our eyes. However, markets did not respond in the way that the “powers that be” were hoping for. After a quick bump in equities, the market began to go lower again. This is interesting in itself, but what was really interesting is that when equities begun to head down, gold decoupled and ended the day with the largest rise ever in dollar terms:
… So what does that mean? Stagflation fears? Hyper inflation fears?
I sure don’t know but I am really liking this decoupled reaction in gold.
I mean who knows what might come from FED printing trillions of dollars and the US government on the way to introducing “helicopter money”, while mines and refiners are shutting down, amidst a shortage of investment type gold and silver.
This is close to a gold buy’s dream scenario pretty much.
What happens if they print way too much, the virus gets contained, but the supply chain for certain goods is still constrained?
I remember reading an article which stated something like; “56% of Americans can’t cover an unforeseen expenditure of $1,000”.
What happens if the people who don’t have $1,000 in their bank account suddenly get say $2,000?
What if the ones who couldn’t afford to hoard goods going into the Corona crisis suddenly got money and went out and bought a lot of stuff because they were still in panic mode?
What would happen if the baby boomers saw inflation coming and started to invest differently because they have already lost a lot of their purchasing power in stocks already?
What happens if the shortages in gold and silver continues while the price of gold heads higher?
What do you do if you fear inflation but can’t buy gold or silver?
You can’t really buy crude oil or copper that easily as a substitute…
So, maybe both fear (fear of inflation) and greed (see the gold price going higher) might end up leading you to finally buy some gold in the ground?
Personally I think the outlook for gold and gold miners is very fascinating at the moment and I think the risk is to the upside…
Especially in gold miners who are trading at ridiculous valuations already.