Love. Fear. Inflation. A Precious Metals' Trifecta / Commodities / Gold and Silver Stocks 2018

By DavidSmith: Going forward, there are – and will continue to be –three primary drivers of global physical gold (and silver) demand.

During certain times in the past only one or two of theseelements provided most of the momentum.

However, as we move into 2019, and for possibly thenext 5-10 years, all three will be in play. They will operate synergisticallyto consistently motivate increased precious metals' buying around the globe. Thiswill happen, even as meeting that demand with sufficient new supply becomesproblematic.

The term "synergistic" is used here onpurpose. By definition, it relates to "the interaction or cooperation oftwo or more organizations, substances or other agents to produce a combinedeffect greater than the sum of their separate effects."

The Three DemandDrivers for Precious Metals

Fear: Not just about socialand economic unrest, but also – as prices begin to move up and away – fear ofmissing out!

People buy gold (and silver) as insurance, as an easilysaleable for cash when needed option, and as a last ditch "get out ofDodge" ticket when the local currency has been "burned" due togovernment mismanagement and corruption.

Ask Vietnamese in the 1970's or Zimbabweans, now intheir second currency-destroying hyperinflation in recent memory. AskArgentines facing their 9th currency-extinction event in modern history, orVenezuelans today.

Fear manifests itself today in the currentroller-coaster ride of the larger stock markets (DOW/S&P, etc.), thestudent debt trigger (at almost $1.5t, much of which is in arrears), liquiditydraining by the Federal Reserve, and record levels of overall U.S. debt.

Love: The Chinese New Yearcelebrations are coming into view... Gold demand from China and India (Chindia) hasbeen consistently higher for the last decade – with no signs of tapering.

This is taking place because history and custom prettymuch ordain it. With incomes rising in both countries, this solidly entrencheddemand trend is set to continue for the foreseeable future.

Chindia- the 800 Pound Demand Gorilla

Inflation: For a number of years,an inflation vs. deflation debate has raged. Deflationary analysts believe thatthe coming massive debt repudiation, at some point inevitably taking place asthe misguided, unpaid-for-spending is unwound, will take asset prices –including precious metals – down with it.

But this perspective fails to consider that centralbanks – foremost among them the Federal Reserve (simply a central bank byanother name) will absolutely do everything in their power to avoid an assetcrash.

Fed policymakers will print, literally and digitally,"as much as it takes" to keep this from happening.

They want and need inflation to keep their game goingas long as possible. Not to mention that the government's massive deficits getpaid off in worth-less money. Politicians can continue spending paper promises,get re-elected, and reward their political allies.

Stewart Thomson of Graceland Updates identifies thecritical distinction which practically guarantees that inflation will becomethe desired outcome, for as long as humanly possible. He states:

When a financial crisis is related to the privatesector, it generally takes a deflationary form. When it relates to thegovernment, it generally takes an inflationary form. The next super-crisis inthe West is vastly more likely to be a government crisis, not a private sectorcrisis, and the place that crisis is most likely to take place in is...America.

The Gold DemandEngine Is Heading Toward a Supply Wall

The trend, if going against you, becomes your enemy. Inspite of increased exploratory spending, new large gold discoveries arebecoming less common, more costly to find, and taking increasingly longer todevelop to production stage when they are located.

Thediscovery trend for large gold deposits is decidedly down.

(Courtesy Katusa Research,sources listed.)

Silver production, marching to its own supply drummer,is not looking all that robust either. At current mining rates, only about 9ounces of silver are being mined for every mined ounce of gold. Yet the silver goldratio is running around 85:1. Is something seriously out of whack?

Seven years after a major, but most likely not themajor top in gold prices at around $1,900 the ounce, gold still shines brightlyin the protect your assets department. Liquid, easily storable, fungible,easily divisible, and historically reliable.

Over20 years, Gold has outpaced stocks... and inflation.

In 2001, at the tail end of a 20-year silver bearmarket, Doug Casey said: At the top,people don’t look at fundamentals because they think they’re no longerrelevant... At the bottom, they’re not looking because they just don’t care.

Sound familiar today?

What have theglobal 'financial wizards' learned since 2008?

In 2008, global debt totals were in the area of $170trillion, to the tune of 275% of the world's gross domestic product (GDP).Today those figures are above $250 trillion and well over 300% of GDP. Look athow little the world's financial wizards seemed to have learned from the criseswhich literally came within hours of taking the entire global financial systemdown with it.

So if you haven't taken this opportunity into decliningprices to either establish a position in physical gold and silver, or have yetto "top off" your holdings, consider answering the question DirtyHarry often posed to his opponents, "Do you feel lucky today?"

David Smith isSenior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com.For the past 15 years, he has investigated precious metals’ mines andexploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and theU.S. He shares his resource sector findings with readers, the media, and NorthAmerican investment conference attendees.

© 2018 Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.