As gold slips from Fed’s control, will oil prices follow suit? Debt/GDP levels challenge positive real rates, favoring gold’s long-term prospects.

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As gold slips from the tight grip of the Federal Reserve, a pertinent question looms large: will oil prices follow suit? The delicate balance of debt-to-GDP ratios challenges the sustainability of positive real rates, tilting the scales in favor of gold’s long-term prospects.

The theatrics of Fed Chairman Jerome Powell’s recent appearance on stage come as no surprise to seasoned observers. With buzzwords aplenty, Powell’s performance echoes the Fed’s steadfast commitment to propping up the stock market bubble at any cost—an unofficial mandate that has become all too apparent.

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Yet, cracks begin to surface in the Fed’s facade as its policy missteps grow increasingly apparent to astute investors. No longer swayed by the Fed’s soothing lullabies, investors are awakening to the harsh realities of the economic landscape, trading based on genuine conditions rather than manufactured narratives.

A chilling chart reveals a stark truth: the simultaneous ascent of gold prices and yields on US long-dated treasury bonds sends shivers down the spines of many. This ominous convergence signals not only the market’s lack of faith in the Fed’s ability to combat inflation but also the looming specter of lost control over longer-term interest rates. With debt-to-GDP levels casting a dark shadow over the sustainability of positive real rates, the stage is set for gold to seize long-term opportunities.

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Yet, gold isn’t the sole concern plaguing Powell’s sleepless nights. Rising oil prices and a resurgent job market pose additional challenges, threatening to further stoke inflationary pressures and complicate the Fed’s delicate balancing act.

As the economic landscape grows increasingly tumultuous, investors brace themselves for the tumultuous journey ahead, navigating treacherous waters with caution and foresight.

justdario.com/2024/04/after-losing-its-grip-on-gold-are-the-fed-and-the-us-government-about-to-lose-the-grip-on-oil-prices-too/


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