How precious and non-ferrous metals can predict the future of the global economy

The growth of precious metals as a safe haven and base metals as the main industrial driver is seen as a leading indicator of what may be to come. Copper, gold, palladium and more all reflect the looming situation in the economy and the impact on investor sentiment.

We take a look at the potentially dire situation and how precious and non-ferrous metals can predict the future of the global economy.

Everyone has heard of the gold standard, but few know that it refers to a time when fiat currencies around the world were pegged to the price of gold and served as the perfect economic unit of account. The detachment of the dollar and other currencies allows inflation to occur, which central bankers use to expand the economy. However, inflation rates are at their highest since the 1980s in the United States, and this has suddenly changed the risk appetite for metals.

Due to gold’s monetary attributes, traditional investors have historically used the precious metal as a hedge against inflation and a safe haven for capital during negative macroeconomic or geopolitical events. Since the 1970s, the price of gold has increased by more than 5,000%. Hard money assets plummeted from the 1980s through the 2000s after the US Federal Reserve put its printing press into overdrive.

Statistics also show that for every 1% increase in the consumer price index – the key measure of inflation rates in the United States – the price of copper rises 18% on average. Base metals have a similar scarcity to precious metals and therefore exhibit similar economic behavior. Palladium and silver prices also attract investors’ attention during generally tough economic times. Each also offers utility to the tech industry and green energy sectors.

Monetary policy and the Fed’s broken inflation rates

The founders of the current monetary system advocated that the money supply should grow at the rate of growth of gross domestic product. The concept would allow the money supply to support the expansion of demand while maintaining an acceptable rate of inflation. The problem with this situation lies in the numbers themselves.

US money supply increased by 800%, while real GDP growth was only 55%. Before the COVID pandemic, money supply growth was nearly 500%, while GDP growth was only 45%. The sudden new supply expansion pushed the consumer inflation rate to 8%, according to official data – a high rate even for developing countries.

Traders watching the copper situation should conclude that if the price of copper goes down, it is terrible for the economy as the market reflects a scary situation that is happening in the industrial sector. Such a situation would indicate that industrial production was reduced, mining operations were reduced, and more, which would contribute to lower prices in the sector.

Meanwhile, falling gold and silver prices or a sideways trend is more indicative of a stronger economy, as it suggests investors are willing to take on more risk. With more risk appetite, there is a large withdrawal of capital from protection assets and investments into companies, stocks, IPOs, cryptocurrencies and other risky assets.

But what exactly do we see today based on the current trend? In the last 14 years alone, precious and non-ferrous base metals have all experienced 4 to 10 times growth, regardless of what is happening in the global economy. Due to the scarcity of these essential commodities, as the money supply increases and inflation spins out of control, the value of precious and base metals is responding with substantial growth.

Build an Inflation Resistant Portfolio with PrimeXBT

Nor is it surprising that new technologies like Bitcoin have emerged over the past 13 years with such an out of control monetary supply. The US and global economy has been struggling for more than 20 years. This lost battle is about to reach its climax, but when? It is important to be prepared for anything and to have access to a wide range of inflation-resistant assets.

With the award-winning margin trading platform, PrimeXBT, traders can access not just Bitcoin, but an assortment of metals that can help hedge against inflation, as well as a way to maintain profits during economic times. difficult. The reliable and lightning-fast trading platform also offers exposure to fiat currencies, stock indices and other vital commodities, as well as a massive list of cryptocurrencies – so there are still plenty of options to satisfy. any occasional risk appetite.

PrimeXBT also offers a way to leverage the skills and talents of more experienced traders who know how to navigate the dangerous times ahead. With the Covesting copy trading module, subscribers can find a ranked leaderboard filled with traders who have maintained a high return on investment even amidst all the market turmoil and volatility associated with inflation and the sudden attempt Fed tightening.

With inflation having no end in sight, capital protection becomes the primary objective. Profits are less common but still there for those who know where to look. Look no further than the powerful margin trading accounts provided by PrimeXBT.

Previous (Published in the Brainerd Dispatch, April - Brainerd Dispatch
Next $53.40 million in sales expected for Washington Trust Bancorp, Inc. (NASDAQ:WASH) this quarter