Hoogland: “12 Months of Celebration for Gold, Silver and Commodities”

The next twelve months are going to be a party, according to Jack Hoogland. In his view, investors focus too much on the economy and too little on what truly drives financial markets: liquidity. While the economic outlook is deteriorating, he expects central banks to start stimulating again. That would be favourable for assets such as gold, silver, copper and uranium.

Earlier this month, central bankers and finance ministers from around the world gathered for the annual Spring Meeting organised by the IMF and the World Bank. The tweet below makes clear that these policymakers believe investors are underestimating the economic damage caused by the war.

In our view, the biggest misconception among many investors (and policymakers such as the IMF) is that they equate economic developments with those in financial markets.

It’s all about liquidity

Financial markets are driven by liquidity. Over the past year, I have often written that we will actually become cautious when the economy is doing too well as a result of excessive stimulus from central banks. That would lead to inflation through overheating, forcing central banks (as in 2022) to slam on the brakes. 

The image below shows some of the indicators we monitor for this.

Because of the energy crisis, we therefore see a situation emerging that gives us reason not to be cautious, but instead to become even more positive.

Lowest consumer confidence ever

Of all countries, the US economy has suffered roughly the least from the current energy crisis. However, in the tweet below we see that consumer confidence has now fallen to the lowest level ever recorded.

And below we see that homebuilders, who had hoped for a recovery in the housing market, are losing confidence again.

Central banks will need to stimulate (more)

These indicators suggest that central banks should not be applying the brakes, but instead will need to stimulate in order to prevent a recession. In the chart below, we see that the amount of paper money in circulation is now in a firmly rising trend.

Stimulative central banks will ensure that this already strongly rising amount of paper money in circulation will continue to increase sharply over the next twelve months.

Our conclusion is therefore the same as it has been over the past eighteen months. The next twelve months are going to be a party for, among others, gold, silver, copper and uranium!

Jack Hoogland worked for the American Citigroup in Amsterdam, Düsseldorf, Madrid and Brussels as a Financial Analyst, Risk Manager and Finance Director. Jack has followed the financial markets since the late 1980s and increasingly shifted his focus toward macroeconomics and the financial system after the credit crisis. Read more from Jack Hoogland.