Credit collapse and the gold bull

Recession, commodity-driven inflation, and higher interest rates all point to a crisis undermining stocks, bonds, and even currencies. It’s why gold is ready to rise again.

Introduction

Markets are asleep, affected by a general summer torpor. But in the background, there are growing signs that all is not well. Precious metals are in early-stage bull markets for good reasons. CPI price inflation is not going away, and market expectations of lower interest rates are in retreat. It is increasingly evident that bond markets are reluctant to absorb medium and long maturity debt, signalling a destabilising preference for near-cash.

That is the evidence from Wall Street. Anecdotal evidence from Main Street not reflected in official statistics are of small and medium sized businesses struggling outside the major cities, retail outlets closing, and rural communities in trouble. In the shops, food prices and those of other consumer necessities appear to be rising more quickly than government statisticians admit. The term “stagflation” is increasingly used to describe current conditions.

In this article, I examine the common driving forces behind G7 economies and their outlook. The dominant features are a new bull market in commodities, increasing credit risk in bond markets undermining wider financial values, and a deepening recession. I shall consider each in turn.