The tipping point and the new normality

The tipping point!

The student of history knows it, major turning points herald a new era at the end of ongoing minor changes, political tensions or other events. Like the breaking of a Bolognese tear, all the pent-up energy is released at once. After the event, there can be no question of a return to the old normal. We seem to be at such a turning point. Our turning point is inflation. Since the 1980s we have become accustomed to low inflation. But the Covid crisis was the turning point of this trend. The barrel has overflowed. One of the big reasons for this is M2 money growth. This money supply, so important for inflation, is growing at an almost exponential rate. But inflation is a process and several lags make it difficult to see ahead. The velocity of money in circulation is currently still very low, but with further improvement in the Covid situation it should continue to rise. This will undoubtedly lead to inflation. Another big change is the credit guarantees which are leading to strong growth in bank credit. In a recession! But there are other political drivers of inflation. The governments of the world are becoming more and more direct. Direct intervention, helicopter money, MMT and much more. This will culminate in a classic wage-price spiral. We see a trend towards fiscal dominance, away from monetary dominance. Others are supply chains, geopolitics and many more.

The new super cycle

We are at the beginning of a new supercycle in commodities. After the 10-year bear market, the sector is under-invested and the companies that survived have emerged stronger. And although we have seen major changes in the commodity sector recently and everyone seems to see this supercycle, most have not yet invested.

Is gold dead?

Confidence comes from repeatedly fulfilled expectations. That’s why gold is many things, but certainly not dead. A 25% price rise in 2020 and its role as a hedge in the Covid Crash speaks for itself. And now gold is down 3.5. But what is this 3.5 % against the 25 %, is this really so bad? No, and many other events speak in favour of gold. One of these is the gold purchases by central banks around the world. As Palantir’s interest shows, this is not limited to central banks. Comex gold delivery is also higher than it has been for a long time. And what do we see in technical analysis? The mother of all “cup and handle” formations. A breakout from this formation could mean a price of $2800.

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Source: https://youtu.be/6CDZgabUJ98