Early in gold's secular bull, contrarian investors looked to real interest rates as one of this metal's primary drivers. Eleven years ago when gold still languished under $300, mainstreamers scoffed at the notion that there would ever be ...
"... So while the world's above-ground gold supply spent three decades growing on the order of 37% to 88% thanks to mining, the Fed has inflated the US dollar supply by 1222%. So the amount of dollars available to chase gold as it becomes more popular are vast beyond imagining compared to what was available at the apex of the last secular bull. An 8%+ annual money-supply growth rate dwarfs a 1%-to-2% gold one into inconsequentiality.
"Today's secular gold bull is therefore destined to peak at real levels multiples higher than what we saw back in early 1980. And just like in that last secular bull, negative real rates will be a major driver. The longer they stay negative, the more they will sour bond investors on getting poorer for lending their hard-earned surplus capital. As they migrate into gold, they will continue bidding up its price, attracting others.
"And this virtuous circle of bond flight capital migrating into gold will be massively larger this time around, for another simple reason. Back in 1970 before real rates went negative and catapulted gold higher, nominal yields were running around 4% at worst. Today they are less than 0.2% for a 1y Treasury! Rising interest rates are far more dangerous to bond investors than inflation, and the risks today are staggering. ,,,: