According to Ole Hansen, Head of Commodity Strategy at Saxo Bank, the US economy is on track to experience a period of low growth coupled with persistent inflation. This economic situation, known as stagflation, is expected to drive significant price increases for precious metals like gold and silver.
Saxo Bank recently revised its US economic outlook for 2024, referring to it as “stagflation light.” This term describes a situation of sluggish growth combined with ongoing inflation. Hansen attributes the downgrade of US credit by Fitch in part to the substantial rise in real interest rates, which has made funding costs for the country extremely high.
Hansen also highlights the impact of rising interest rates on consumption costs, affecting credit cards, new cars, and mortgages. Furthermore, there has been a noticeable slowdown in job data and spending.
The combination of low growth and moderately high inflation is seen as indicative of stagflation. If this scenario materializes, it will confirm the view that central banks, including the Federal Reserve, are struggling to combat stubbornly high inflation. Further actions taken by central banks could potentially damage economic growth without effectively addressing the persistent price pressures. In Hansen’s opinion, the US Federal Reserve may choose to cut rates even before reaching the 2% average inflation target. This could lead to the Federal Open Market Committee (FOMC) increasing its target to 3%. Such developments would result in a repricing of future inflation expectations, accompanied by a decrease in real yields, thereby supporting commodities.
During periods of stagflation, specific commodities become attractive as inflation hedges and for portfolio diversification. Hansen also notes that a weaker US dollar can make dollar-denominated commodities more affordable for non-dollar-based buyers, potentially driving up demand and prices. These commodities are appealing because they can deliver positive real returns, even in the face of inflation impacting traditional investments.
Hansen explains that commodity prices often spike when there are supply limitations or strong demand. He emphasizes that a well-supplied market would typically trade in contango, with higher forward prices accounting for storage, transportation, and funding costs. Hansen presents a chart indicating the spread between first and twelfth month futures contracts for major energy and metal futures. The commodities trading above the yellow line, representing the inverted one-year funding cost of around 5.3%, indicate some degree of tightness in the market. This is crucial to understand, as it may support prices despite a weakening economic outlook and provide additional returns for investors.
Hansen suggests that precious metals, such as gold and silver, may gain an advantage during a stagflation period. On the other hand, commodities driven primarily by consumer demand, like agricultural products, are likely to see weaker performance. Industrial metals may also be affected, but high funding, employment, environmental costs, and continued demand for green transformation metals might still benefit this group of commodities in the context of stagflation. Consequently, Hansen recommends that investors seeking to engage in commodities during stagflation should carefully select and diversify their portfolio across different sectors and regions.
Article generated from corporate media reports.
Independent Journalism Is Dying
Ever since President Trump’s miraculous victory, we’ve heard an incessant drumbeat about how legacy media is dying. This is true. The people have awakened to the reality that they’re being lied to by the self-proclaimed “Arbiters of Truth” for the sake of political expediency, corporate self-protection, and globalist ambitions.
But even as independent journalism rises to fill the void left by legacy media, there is still a huge challenge. Those at the top of independent media like Joe Rogan, Dan Bongino, and Tucker Carlson are thriving and rightly so. They have earned their audience and the financial rewards that come from it. They’ve taken risks and worked hard to get to where they are.
For “the rest of us,” legacy media and their proxies are making it exceptionally difficult to survive, let alone thrive. They still have a stranglehold over the “fact checkers” who have a dramatic impact on readership and viewership. YouTube, Facebook, and Google still stifle us. The freer speech platforms like Rumble and 𝕏 can only reward so many of their popular content creators. For independent journalists on the outside looking in, our only recourse is to rely on affiliates and sponsors.
But even as it seems nearly impossible to make a living, there are blessings that should not be disregarded. By highlighting strong sponsors who share our America First worldview, we have been able to make lifelong connections and even a bit of revenue to help us along. This is why we enjoy symbiotic relationships with companies like MyPillow, Jase Medical, and Promised Grounds. We help them with our recommendations and they reward us with money when our audience buys from them.
The same can be said about our preparedness sponsor, Prepper All-Naturals. Their long-term storage beef has a 25-year shelf life and is made with one ingredient: All-American Beef.
Even our faith-driven precious metals sponsor helps us tremendously while also helping Americans protect their life’s savings. We are blessed to work with them.
Independent media is the future. In many ways, that future is already here. While the phrase, “the more the merrier,” does not apply to this business because there are still some bad actors in the independent media field, there are many great ones that do not get nearly enough attention. We hope to change that one content creator at a time.
Thank you and God Bless,
JD Rucker
