Inflation is higher. What a shock (not)!

Why have gold stocks lagged bullion?

“The answer lies in underlying costs that have increased over time, blunting the flow
through to the bottom line despite the positive impact of higher commodity prices on
revenues. But with gold prices projected to go higher (a move towards $3,000 is not out
of the question), coupled with a sufficient margin of safety embedded in current
valuations (priced for ~$1,500 per ounce), we believe this group should not be overlooked
— offering an excellent risk/reward proposition.” David Rosenberg

This chart compares the Canadian gold producers XGD ETF to bullion. See my notes on chart:

More on the growing need for energy

“According to one estimate, data centers will grow from consuming 2% of the world’s electricity demand to 10% by 2030. That’s the equivalent of adding the electric generation capacity of the current U.S. power grid. Energy demand driven by large data centers, AI, and electric vehicles is accelerating demand for natural gas to unprecedented levels. Natural gas will be critical to meeting surging baseload capacity and backing up renewable sources of energy.” BearTraps

The natural gas daily chart seems to be showing a nice little triangle formation. A breakout would be bullish.

 

Spendy-governments driving inflation up in a  slowing economy: Stagflation!

“This year the world’s largest economy is projected to run a budget deficit (where spending exceeds taxation) of more than 7% of GDP—a level unheard of outside recession and wartime. Bullish hard assets!” BearTraps

Loan delinquencies due to unemployment (slowing economy!)

What a surprise (not!). Inflation reported higher than expected!

I’ve been telling you this would happen for 3 years. Meanwhile: They told you inflation would fall to 2%. Here we are 3 years later….

Lesson: Whether its nonstop frivolous spending, carbon taxes, student loan forgiveness, minimum wage increases, etc. —-You cannot have your cake (free stuff, business-unfriendly policies) and eat it too (low inflation)!

In fact, in August 2021 I wrote a detailed look at “Modern Monetary Theory”, which is the financial policy that socialist governments have employed in recent years. The theory basically states that governments can spend endlessly.  It wont cause inflation because they can just print more money to cover that problem. Read the blog for details. My blog warned about the fallacies of this theory, and now we’re seeing the results. Stagflation! 

Bottom line:  Too bad Liberal governments don’t read this blog. Not that they would have listened.

Stock market today: US futures sink as inflation report comes in hot (yahoo.com)

Conclusion

Three simple words: Bullish hard assets!

6 Comments

    • As a Libertarian – I do not like government to use our tax dollars for ANY type of private enterprise of any industry. Not for oil, not for EV battery plants, not for Bombardier & SNC bailouts, not for AI investments. Nor should it be sent to foreign countries unless obliged under NATO for military defense. Nor should it be used to pay political friends to develop apps, or for charitable donations of connected organizations like WE. Not for “gender” studies or to expand the government employee payroll with newly invented titles (Minister of Middle class??).
      Nothing but what our tax dollars were originally intended for – aka to benefit citizens only with essential needs.
      Free enterprise of all types should not involve government handouts, nor should charities or foreign nations.
      Its our money, not theirs (politicians). So use it for us.

      Reply
  • Hi Keith, where do you think Gold price will correct at? With a bull run like this recent one, seems to have gone up too soon almost daily. Thank you

    Reply
    • Yes its overbought. Potential for a pullback to $2250. I’m staying in the trade despite that potential, but would view such a move as another opportunity to buy more.

      Reply
  • I believe the long awaited correction has begun. First target is the previous all time top around 4800. But we are so far above the 200 week MA that it could easily correct much lower than that.

    Reply
    • Agree. Daily chart shows a few lower peak troughs on SPX. 4800, or lower.

      Reply

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