Page 25 - Bullion World Issue 9 January 2022
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Bullion World | Issue 09 | January 2022
leading financial institutions re- their 'precious metal' classification). debt mountain, we find ourselves in
balance their investments from Macroeconomic and monetary a very precarious balancing act.
stocks and bonds into metals. Now factors, such as interest rates,
critics may state that I am simply exchange rates and inflation, debt Government policies on the global
cherry-picking the cycle start or financial crisis, wars, etc. can stage are now driven within a
dates of 2000 or indeed 1970. The suddenly act as the key drivers 2-pronged approach into MMT
counter argument to that, however, within their particular cycles. (Modern Monetary Theory).
is that these are 21 & 51-year time Firstly, enormous deficit spending
frames and therefore surely long Recognising these distinct (over and above the present debt
enough for a fair comparison. The opportunities between one precious mountain) is required to counter
dire macroeconomic picture of metal, over and above another the negative economic effects
the 1970s was well recorded, that one of the 5 precious metals that of Covid lockdowns, paying the
drove the gold price. In the 2000s, we make available to our investors drug companies and medical
broad M3 money supply only really (Gold, Silver, Platinum, Palladium care systems, alongside new
began to be supercharged from and Rhodium) offers our clients global policy objectives with the
2002-2003 onwards (under The the opportunity to diversify their enormous push into the green
Fed's Greenspan) and therefore an overall stock, bond and property lobby agenda of pollution controls
applied macroeconomic approach portfolios as well as our tried and and the decarbonisation of
to research must be utilised to tested methodology for producing energy production. Secondly, the
portfolio analysis at all times to an Alpha return over and above a enormous growth of broad money
recognise major cyclical trend static holding of any one or more supply running at an expansionary
changes. of the aforementioned 5 precious rate of 30% year-on-year in the
metals. USA for example, has contributed
A great deal of research has to soaring inflationary pressures,
emanated out of the wealth These unique elements and the which in turn, have pushed real
management field over the last fact that precious metals are one interest rates yields to the most
few decades. They have delved of the oldest financial instruments, negative levels since the 1970’s.
deep into long-term historical with finite supply and critical Essentially, we are witnessing an
performances of well-balanced industrial demand, easily sets outright attempt to actively debase
asset portfolios where a precious precious metals apart as a true the debt mountain by reducing
metal diversification has been portfolio alternative with distinct the value of FIAT currencies, or
applied. Such portfolios have diversification, risk management more succinctly, a global monetary
clearly outperformed those and investment qualities. debasement event.
portfolios with little or no exposure
to metals. The research is out Why is there such a big The global infrastructure build-
there for everyone's consumption, opportunity now? Where are we outs and ever-tightening pollution
however most of the time, it is on the cycle for precious metals? controls are putting a medium
simply ignored or just simply not Well, let's rephrase that more to long-term fire under the
utilised properly. accurately and highlight why demand curves in some of the
there is such a clear portfolio precious metals. Together with
Gold is money and hence applying diversification opportunity into ever-increasing demand from the
analysis on monetary aggregate metals at this juncture? The industrial sector at a time of falling
expansion or indeed contraction, overriding global debt crisis has ore-grades and higher extraction
government deficit spending overtaken mathematics and costs, are causing a demand-
policies, bond market yields, real alongside that, the simple fact supply imbalance which we are
nominal interest rate yields and that global policy leaders cannot forecasting to grow annually.
various other forms of monetary sufficiently raise interest rates With the ongoing global debt
analysis needs to be applied. With above the zero-bound levels that we expansion and aggressive global
regards to the other precious have seen for some time now; aside monetary debasement coupled
metals (like all commodities), these from miniscule marginal rate rises. with considerable negative real
are very much driven by economic The serviceability of debt and debt interest rates, this is forcing
fundamentals (i.e., supply and leverage within the system at higher wealth portfolio managers and
demand, cost of production, ore interest rates would not be feasible individuals to re-analyse their
grades, energy costs, etc.) over as this would otherwise very easily positions and diversification
distinct time frames or recognizable tip the property, stock and bond requirements. Investing into the
cycles if indeed deep analysis asset class values towards severe precious metals sector at this time,
is applied by investors. Unlike value destruction and considering when considering, ceteris paribus,
commodities, however, they also these assets valuations are the the historic overvaluation metrics
tend to act like currencies (hence bedrock collateral holding up this of both the stock and property
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