As we observed at the beginning of this volatile year, markets tend to move two steps forward and one step back… until the moment the shooting starts, or something breaks and the extent of the monetary crisis can no longer be hidden. Then, suddenly, it’s all forward, no back.
So it’s with gold as it awaits its next triggering event.
The superbubble we have warned about repeatedly has met its pin in the form of the Federal Reserve’s new interest rate increases. The air is coming out of the “everything” bubble, stocks, bonds, and real estate, all bubbles inflated by the Fed’s gusher of liquidity.
Consider a variety of recent headlines that report on the financial turbulence we are experiencing:
S&P hits new closing low, stocks tumble amid Fed fears, Yahoo Finance.
Dow enters a bear market, Wall Street Journal.
Maybe home prices have been in a bubble after all, Bloomberg.
The Biden administration has approved $4.8 trillion of new borrowing, Committee for a Responsible Federal Budget.
Inflation may cost average US family extra $11,500 this year, Epoch Times
But all this well-known financial news—inflation and energy prices that erode retirement savings and household budgets—is crowding other important news off the front pages. But don’t overlook the profound social consequences of our economic turbulence.
One consequence that can no longer be missed is a slow-burn populist revolution. Consider the changes in European governments: a new British Prime Minister (as well as a new king), and election upsets in both Sweden and Italy, all just this month.
Meanwhile, the U.S. elections are only six weeks away. With the pollsters’ big misses in 2016 and 2020, and a growing number of people who refuse outright to respond to the polls, one should not be surprised to discover the populist revolution continuing here. Such revolutions trigger crises as they head off in unexpected directions.
Experience teaches us that the next big financial crisis often erupts where few are looking. Less developed countries and their publics are already being buffeted about by sharply higher energy and food prices. Now we suggest keeping an eye on the impact of rising rates and the dollar’s climb on the foreign exchange markets. Just as adjustable mortgage rates were the undoing of many homeowners during the last housing bubble, we want to warn about the emerging economies that have piled up mountains of debt denominated in U.S. dollars. Their revenue is earned and taxes are paid in their own currencies, but their debts must be paid in more expensive dollars.
Expectations of a U.S. monetary contraction helped trigger the 1997 “Asian Contagion,” the Asian financial crisis. Before that, it was the “Tequila Shock.” When the Mexican peso was suddenly devalued, Mexico’s massive U.S. dollar debt became unpayable. A global crisis ensued. In each case, a cascading series of bankruptcies resulted. A review of major financial crises and their frequency is a real eye-opener. Wikipedia’s “list of economic crises” goes back centuries. One can’t escape the conclusion that financial turmoil can be almost continuous.
There is plenty of combustible material for a conflagration to drive gold to unimagined new heights. Europe’s approaching winter puts a sharp focus on Russian energy. Natural gas prices continue to soar, and the sudden leaks in the Nord Stream natural gas pipelines from Russia to Germany suggest sabotage and even false flag attacks. In any case, nuclear sabers are rattling in the background.
Nor can we take our eyes off the Persian Gulf. Protests in Iran may be native, driven by outside forces with regional ambitions, or both.
In short, the financial conditions of inflation, recession, and rising interest rates are well known. But for the gold market, there is no shortage of additional accelerants that can suddenly drive prices much higher.
The financial crisis is deep. Tensions are high. In this volatile environment, expect the unexpected and prepare with gold and silver.
If you’re interested in investing in precious metals, let us provide you with a free one-on-one consultation.
The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment advice and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.
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