The Macro Case for Precious Metals
Thanks to a subscriber for this chart-laden article from Crescat Capital. Here is a section:
Read entire articleAs inflation continues to develop in the economy, see below the incredible link between gold and CPI since the GFC.
Note how after the pandemic lows, gold front ran the potential risk of a rise in consumer prices and the entire precious metals market appreciated sharply.
It is important to remember that before recently peaking, gold had been going on a streak for two years already.
The metal was up more than 75% from August 2018 to August 2020 and even reached historical highs during this period.
Back then, with CPI around 1%, very few investors foresaw inflation as a risk to the economy. Now it is a real problem.
We think gold likely appreciated too quick and too fast becoming what some thought as an obvious trade.
Extreme sentiment probably explains the reason for its recent weakness after signaling way earlier than any other asset the possibility that an inflationary environment could be ahead of us.
We are now on the other side of this extreme.