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Gold: Inflation Is Here To Save The Nation From Deflation



  • Precious metals have underlying support from the expectations that President-elect Biden will spend trillions of dollars to support the economy.
  • This will further weaken the dollar, increase the risk of inflation, and raise the price of gold and silver.
  • Inflation is already here, which is bullish for gold and silver.
  • Looking for a portfolio of ideas like this one? Members of Mean Reversion Trading get exclusive access to our model portfolio. Get started today »


Precious metals settled higher on dovish central bank comments. Wednesday, February gold was up $10.70, while March silver was up 13.7 cents. Global central bank officials made dovish comments and there was safe-haven demand as the US reported a record number of COVID-19 deaths on Tuesday. A rally in stocks and a strong dollar limited the rise of precious metals. Global economic data was bearish for precious metals, especially for silver, which is an industrial metal. Eurozone industrial production rose 2.5% month to month, stronger than expectations. It was the biggest increase in four months.

Fed comments and Eurozone central banker statements have been bullish for gold. They have been dovish in relation to their 2% inflation goals, which is bullish for precious metals. The real inflation rate is more like 10%, if you count food and energy, according to Shadowstats.com. However, Wednesday’s US economic data was bearish for gold, as it appeared that there's no inflation and that it's under control. Official inflation data does not count food and many other key parts of the economy. The government also doesn’t want you to pay any attention to the debt. The debt bubble is close to collapsing. If interest rates rise, debt defaults are going to be a tsunami through the global economy. If inflation rises above 2% based on Fed data, they will use the yield curve by capping long-term interest rates to seek to control the effects of inflation. The market and the Fed know that we need inflation in the system to get out of this recession and to deal with the mountains of debt.

Gold also has support from the worsening COVID-19 pandemic. The economy is on lockdown, so there's little economic activity. This hurts industrial metals, such as silver. Silver, however, is not just a commodity. It's also a safe haven asset

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This article was written by

Equity Management Academy is a team led by CEO Patrick MontesDeOca, a seasoned trader with over 30 years of experience. The team uses a proprietary AI system to identify investment opportunities and provide weekly reports for day, swing and long-term trades with precise entry and exit points. They lead the investing group Mean Reversion Trading. The group features reports and alerts from the AI Variable Changing Price Momentum Indicator. Features include: Weekly reports with actionable entry/exit points, research for trading futures, options, ETFs, indices and stocks, Early Bird Reports keeping the group ahead of market opportunities, and chat to discuss ideas. Learn more.

Analyst’s Disclosure: I am/we are long GDX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (33)

This article is a sensible read as it depicts and explains how inflation can save the economy from deflation, and how this is indirectly going to affect the buyer's market. So we should go and invest in gold and digital gold on Augmont as soon as possible.
TBLS profile picture
15 Jan. 2021
JPM beats only on trading not on core business
That’s all you need to know about who is manipulating the markets
I luv all this talk about deflation, yet the deflation they fear is on assets which are not included in the inflation numbers.
Bottom line you can have mass inflation and at the same time mass deflation in assets.
JPM beat earnings emboldening them to further manipulate the market.
Tao Jaxx profile picture
Dear author,

You should tell the market about your bullish view, he doesn't seem to have gotten the memo: this gold thing keeps hugging the 200 DMA like it's about to break it and slide. Disappointing. Looks like Bitcoin stole the show: used to be that bullish articles on gold would attract hundreds of comments. Now it's a handful.
It's because there are many bullish articles every day now. Everybody is in on gold already. The reversal will be a bitch.
"It's because there are many bullish articles every day now. Everybody is in on gold already. The reversal will be a bitch."

LOL! Gold is heading higher. Perhaps after it reaches $2450 it might decline by 10% or so before moving higher. It is time to buy gold mining stocks. GFI and KGC in particular are very cheap now.
Meanwhile in the non-senile world.

Gold is in a downtrend and heading lower.

Sure, it might briefly bounce to $1900 but that's irrelevant.
15 Jan. 2021
Deflation indeed.
dpeterson5620 profile picture
Author seems to say buy gold but not silver. But, generally when gold rises silver does too. They will both rise with inflation.
Gold and silver aren't the only precious metals. Rhodium is $21,300 an ounce now, and keeps hitting new all time highs, up from around $6,000 at the start of 2020, and up around $3,400% from its low of around $600 in early 2016. Rhodium is mostly used in catalytic converters. Gold is mined at around 150 times the rate of rhodium. Palladium has also rallied nicely the past few years. Platinum is rallying off a very low multi year low last year. A good way to invest in rhodium, palladium, gold and platinum is with SBSW shares. SBSW is the largest miner of both rhodium and platinum, second largest palladium miner, and also gets around 1/4 of its revenue from gold. SBSW shares are cheap, at only around 5 times 2021 expected earnings. The earnings estimates keep increasing. SBSW plans to pay high dividends, between 25% and 35% of earnings.


Rhodium is now $21,750 an ounce! Gold is mined at around 150 times the rate of rhodium, so at under 12 times the gold price, rhodium seems like a bargain compared to gold.

The Fed this, the Fed that!! are investors on drugs or what? the Fed creates bubbles and then investors expect the Fed to solve problems; the Fed is not going to help investors with falling manna from the sky
@Rinascimento Yet, for some reason, the Fed keeps reinforcing that it will intervene. Eventually, I assume that will stop.

The Fed wants to control everything with the latest being climate change
stoney500 profile picture
The Fed needs to temporarily let interest rates rise and (with the help of their bullion bank buddies) knock down gold prices, so they a. Have rates to cut without going negative, b. Save some credibility and not have too high of a gold price.

The Feds little strategy is obvious and will end soon (long term calls in GLD and/or TLT are sure winners) just be prepared for choppiness
A bit too much conspiracy and/or what if theories... do you have any data?

IMO - Fed is not raising rates, and it can perform yield curve control and money printing with the same mechanism (print, buy long end treasuries, and keep long rates at a certain goal).

When it's time, the Fed will welcome inflation and have room to begin a rising interest rate cycle. 1940-1950 Fed tells you a lot about the tools they may look at using.


The dollar is going to be devalued against gold, as will other currencies though likely to a lesser degree. IMO - That is the final outcome, just in a controlled manner.
Yes, FED's strategy revolved around the gold price XD. FED doesn't need to do anything, nothing is broken.

Rates are naturally going to rise in the future and gold is naturally going to crash.
"Rates are naturally going to rise in the future and gold is naturally going to crash."

LOL! Rising real interest rates is what causes gold to decline. While nominal interest rates might increase a bit, they are likely to increase at less than the increase in inflation, making real interest rates even more negative, and making gold rise in dollar terms.
Fed will start yield curve control as they can't let the rates rise with inflation. THAT is what will really light a fire under gold.
An interesting article. I've had $CEF for a while.
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