Central banks are at a dangerous crossroads as they must cope with increasing inflationary pressures and ensure the global remains strong. In a recent report, Degussa chief stylist Thorsten Polleit says it’s only a matter of time before investors turn to gold and silver as central banks struggle to walk the dangerous line between growth and inflation:
The exchange value of gold and silver cannot be permanently manipulated downward by central banks, especially when times get really tough. Moreover, physical gold and silver (unlike bank deposits) do not carry a counterparty or default risk. Finally, physical gold and silver make the investor independent of the financial system, transaction fees, clearing and delivery procedures, and finances.
According to Thorsten Polleit, any meaningful tightening and it could be disastrous for financial markets
Cryptocoin. com, investors avoided the gold market for most of 2021 as central banks led by the Federal Reserve sought to change their monetary policy. However, the Federal Reserve wants to cut back on monthly bond purchases before the end of the year. Markets also see the potential for the US central bank to raise interest rates before the second half of next year. These hawkish prospects keep the gold price tag below $1,800.
But Thorsten Polleit says investors are beginning to realize that the Federal Reserve is falling prey to monetary policy, and that any meaningful tightening could be disastrous for financial markets:
It is clear that a monetary policy aimed at raising interest rates and limiting credit and money supply expansion would be tantamount to an earthquake for the global and financial system. Because the most recent recovery has been driven by extremely low interest rates and an extremely generous supply of credit and money. If central banking meant a job and banks fought price inflation by raising interest rates to ‘normal levels’, a recession would be inevitable.
“Adding gold and silver to the portfolio at current prices makes a lot of sense for long-term investors. ”
st notes that he expects any central bank tightening to be “cosmetic” in nature and is unlikely to see a significant increase in real interest rates from their historic lows:
Global debt levels are already overwhelmingly high, and many borrowers have failed to survive in an environment of higher real borrowing costs.
In the current environment, Thorsten Polliet says the best investors can hope for when it comes to mounting pressures is that it doesn’t get out of hand. Global debt levels are already overwhelmingly high, and many borrowers have failed to survive in an environment of higher real borrowing costs, according to the report. Thorsten Polliet comments:
Adding physical gold and silver to your portfolio at current prices makes a lot of sense for long-term oriented investors who share the view that central banking is indeed at a crossroads and believe that the most likely scenario is that the inflationary regime continues to push its limits.