There is an established theoretical relationship between bonds and equities which provides a framework for the future performance of financial assets. It would be a mistake to ignore it, ahead of the forthcoming rise in global interest rates. Price inflation is roaring, and so far, central banks are in denial. But it is increasingly difficult to see how monetary policy planners can extend the suppression of interest rates for much longer. There can only be one outcome: markets, that is to say prices determined by non-state actors, will force central banks to capitulate on interest rates in the summer. Hardly noticed, China is deliberately putting the brakes on its economy, which will cause an inflationary dollar to collapse, unless the US defends it by putting up interest rates. Deliberate? Almost certainly, as part of its strategy, China is taking the financial war with the US into the foreign exchanges. It has to be physical metal, because anything else imparts counterparty risk, and that’s the last thing you will want in a financial crisis. When the importance of gold is realised again, there is a significant risk of government confiscation, which is where silver comes into the picture. Central banks own none, or at least none that we are aware of, so in the event of governments doubling down against gold ownership silver would become much more precious.
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