When will gold ever take off?

 

With inflation soaring and the market tanking, why doesn't gold take off?

Because it's not yet time.

Because the Fed is now raising rates and selling down its balance sheet.  M2 is dropping for the first time in 40 years.  The Fed is causing a contraction that will not stop until the Fed stops.  And as long is the economy contracts - so will everyting within the economy - except for very high end hard assets, because the very wealthy are so wealthy they are beyong the reach of the broad economy and they are still buying very high end hard assets.  Because they see what is coming.

What is coming?

It won't be long before the Fed's contracting grip crushes something.  It could be the broad market.  It could be an over levered too big to fail institution.  It could be some country's sovereign debt.  it could be a single derative contract so big and with so many counter party vulnerabilities it takes down a number of large players that all need to be bailed out.  It could be a lot of things.

But it will be something.  It always is when liquidity dries up.  And the Fed raising rates while tightening its own balance sbeet is the definition of liquidity drying up.

All in the face of a global supply side inflation shock.

The Fed tightening affect the demand side.  THe Fed is powerless over the supply side.

So when the Fed's tightening leads to the next crisis and Fed is forced to reverse - the massive supply side inflation will still be in effect, while a demand side deflation takes the broad economy into its vicelike grip.

This is not a prediction .  This is a description of what is happening and there is no policy prescription for it. What is will continue being.

And as the END GAME arrives, all the Fed will be able to do is exactly what the Japanese Central bank is doing: YEILD CURVE CONTROL.

That means printing unlimited money to purchase its own debt to keep rates from  blowing out.

Japan is there now.  We will all be there soon.

ANd when it happens Gold goes to the moon - and all paper and electronic money will frantically chase the only remaining real value that is HARD ASSETS.