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.
Why One Survival Food Company Shines Above the Rest
Let’s be real. “Prepper Food” or “Survival Food” is generally awful. The vast majority of companies that push their cans, bags, or buckets desperately hope that their customers never try them and stick them in the closet or pantry instead. Why? Because if the first time they try them is after the crap hits the fan, they’ll be too shaken to call and complain about the quality.
It’s true. Most long-term storage food is made with the cheapest possible ingredients with limited taste and even less nutritional value. This is why they tout calories so much. Sure, they provide calories but does anyone really want to go into the apocalypse with food their family can’t stand?
This is what prompted the Llewellyns to launch Heaven’s Harvest. They bought survival food from multiple companies and determined they couldn’t imagine being stuck in an extended emergency with such low-quality food. They quickly discovered that freeze drying food for long-term storage doesn’t have to mean sacrificing flavor, consistency, or nutrition.
Their ingredients are all-American. In fact, they’re locally sourced and all-natural! This allows their products to be the highest quality on the market, so good that their customers often break open a bag in a pinch to eat because they want to, not just because they have to due to an emergency.
At Heaven’s Harvest, their only focus is amazing food. They don’t sell bugout bags, solar chargers, or multitools. They have one mission – feeding Americans in times of crisis.
What they DO offer is the ability for people to thrive in times of greatest need. On top of long-term storage food, they offer seeds to help Americans for the truly long-term. They want them to grow their own food if possible which is why they offer only Heirloom, Non-GMO, Non-Hybrid, Open-Pollinated seeds so their customers can build permanent food security on their own property.