Speaking with Wall Street Silver earlier this week Rick Rule argued that it will take more than one year of 7% CPI expansion for main street to jump on the inflation fear train. The last forty years of declining real interest rates and highly accommodative monetary policy have meant that investors don’t fear inflation or the consequences of higher interest rates. Inflation hasn’t been here for long enough to really scare people, two full generations of institutional money managers haven’t experienced it.

The Bitcoin market returned to a more docile state following a fear-fuelled last week. Investors and traders appear to be digesting the macro possibilities within this new inflationary regime markets we have entered, alongside an increasingly hawkish Federal Reserve. This change in tune has rattled the Bitcoin market in the short term and is at risk of taking control over its medium-term prospects.

On Friday we brought you part 1 of the latest World Gold Council Gold Outlook 2022 report. Today the second part talks to inflation, real interest rates, market volatility and gold drivers outside all of that.

The World Gold Council have just released their Gold Outlook 2022 report. It’s a relatively lengthy read so we are bringing it to you in 2 parts. Today we look at the very topical impact of rising rates in the US. We mentioned yesterday that the 3-4 rate hikes the Fed is now signalling has been so well signalled that the market has now priced it in. It was another sea of red on wall street last night so maybe it is still digesting it… That said the WGC point out a very interesting and bullish dynamic about such signalling v reality for gold. Sell the rumour, buy the fact is a thing.

US Treasuries and Government bonds the world over are offering nominal anemic yields that have investors looking further afield. 10-Year Bonds in Australia are returning 1.8%, approximately half of the 3.20% annualised inflation rate predicted by the RBA in 2022. With cash in the bank getting eaten away, the Big 4 banks offering 0.25 - 0.30% on fixed term deposits, and the hidden risk of bail-ins(without due return on said risk), more and more savers are moving funds out of the system.

There appears a large portion of economic forecasters predicting that 2022, whilst more volatile than normal, could see continued strong gains in US shares despite the still sky-high valuations. Already this year we have seen some large losses on US shares and then a strong rally like last night. Last night everything went up except the USD and all on the back of Fed chair Powells virtue signaling of ‘we’ve got this’. Today we talk about why passive ETF’s and lack of breadth could see them most certainly ‘not got it’…

With onchain indicators hitting significantly oversold conditions, Bitcoin futures markets see all-time-high leverage, with increased chances of volatility, and a short squeeze bias.

As alluded to in our annual wrap up last year, the technical cup and handle formation for gold is clear, with a number of prominent market commentators pointing to it.

A bit of a longer one today but it is a critical read if you want to understand the ‘big picture’. This is the macro of macro.. We summarise Ray Dalio’s latest piece on the changing world order and how that impacts investment. A fascinating look at the current setup in the long term historical context as we try to make sense of these times.

Whilst there is growing consensus around strong inflation and the subsequent need for the Fed and other central banks to tighten monetary policy, respected analyst Raoul Pal has maintained his view throughout that the inflation will be somewhat transitory and a global slowdown, and indeed an “economic inflection point” is close.