Gold Getting the Last Laugh as Policy Makers Fail

By Matthew Piepenburg

Partner

February 7, 2024

In this brief yet substantive conversation with Charlotte McLeod of Investing News Network, VON GREYERZ partner, Matthew Piepenburg, bluntly answers the financial questions and concerns which political figures and central bankers have a vested interest in mis-representing.

Toward that end, he highlights the recessionary facts which are currently being ignored by an S&P rising on rate cut projections from the US Federal Reserve. As for pending rate cuts, Piepenburg argues that Powell will indeed cut rates in 2024 for the simple reason that Uncle Sam (and risk asset markets) can’t afford “Higher for Longer” much longer…

Of course, rate cuts make Piepenburg temporarily bullish on equities, as lower rates are an obvious tailwind for risk assets which go up or down depending on whether central banks are dovish or hawkish.

As for gold, this asset wins regardless of which direction—hawkish or dovish—the Fed takes. Should Powell cut rates (dovish), the USD declines and gold outperforms. However, should Powell be bluffing and stick to higher rates (hawkish), then risk asset markets tank and gold ultimately rises above that chaos. Again, gold will rise in either scenario.

Most importantly, Piepenburg sees an ultimate and inflationary end-game when the Fed is eventually required to resort to extreme QE (mouse-click money) to monetize the trillions in deficit spending projected out of the US Congressional Budget Office. Stated simply, Uncle Sam is drowning debt, and the only buyer of his IOUs will be a Fed money printer, which is inherently inflationary. As such, gold will rise because the USD will be debased to pay Uncle Sam’s debt.

As Piepenburg concludes, this pattern of debasing sovereign currencies to save otherwise rotten debt systems is nothing new. In fact, and without exception, this is what all broke(n) regimes have done throughout history. The US, and USD, will be no exception, which means gold will be exceptional.