Gold price continues to rise and ended five months of consolidation after US inflation pressures soared to 31-year highs, according to analysts. According to Sprott CEO Peter Grosskopf, the precious metal is returning to all-time highs. Cryptocoin. com, we have compiled Peter Grosskopf’s evaluations on the markets and gold for our readers.
Peter Grosskopf: Gold price strengthens with the support of falling real interest rates
In a statement, Peter Grosskopf said that Wednesday’s inflation data, which showed annual inflation rose 6.2%, did not add any new information about the state of the US economy. Sprott CEO notes that consumers have seen the purchasing power of fiat currencies decline for decades and makes the following assessment:
The latest federal government budget relies on enjoying record-low interest rates, while strong inflation spurs growth and helps boost revenues, all for a long time to come. This is de facto a policy of financial pressure.
However, while most people have been dealing with rising prices for years, Peter Grosskopf notes that these latest figures raise fears that the rate of inflation is far beyond the targeted rates. The famous CEO notes that these concerns are also reflected in the bond markets, and that the five-year and ten-year breakeven rate (the difference between nominal bond rates and Treasury Inflation-Proofed Securities) has experienced the deepest reversal in recent history, so falling real interest rates have helped strengthen gold.
Peter Grosskopf says inflation appears to be spiraling out of control, as the normal demand and supply economy has shifted with government support. The CEO states that government interest rate control, spending, new social programs and the spillover from the pandemic have thrown the fundamentals off balance:
Governments have put their fingers in very different ways, in very different markets. This has interfered with the pricing of capital markets and risk, and we are now seeing it on Main Street as well.
“People realize that gold’s record as a protector of wealth is uncontested”
Sprott CEO Peter Grosskopf states that this fear of out-of-control inflation is also reflected in the bond markets, and that break-even rates, the difference between nominal bond rates and Treasury Inflation-Protected Securities, experienced the deepest reversal in recent history between five-year and 10-year rates. US real interest rates fell to a new record low after Wednesday’s inflation data. Peter Grosskopf explains it this way:
This shows us that the market has lost faith in the Fed’s ability to control inflation at the desired level.
Sprott CEO says investors fear the Fed won’t be able to rein in inflation because they don’t have the right tools or the ability to use them. Many economists point out that inflation is driven by global supply problems that interest rate increases cannot affect. At the same time, Peter Grosskopf notes that any material increase in interest rates will have a significant impact on its budget, as the US borrowed heavily during the pandemic:
Not only are your budgets exploding a lot more, but more importantly, the economy now depends on the market. If the Federal Reserve tightens too much and the market bubble bursts, it will directly affect the economy. The Fed doesn’t have a good choice.
Peter Grosskopf, who has no good options, states that investors want to find market insurance outside of fiat currencies and convert them to gold:
People are realizing, once again, that gold’s long-term track record as a wealth saver is uncontested.
To be informed about the last minute developments, contact us Twitter’, Facebook and Instagram
Follow on and Telegram and YouTube Join our channel!
