Everything is connected. The markets have been buying into the “Higher (rates) for Longer” narrative for a few months now but we are starting to see the shift that I’ve been personally expecting for some months and it's right on time. On Wednesday it was Canada that kicked things off by becoming the first G7 country to Cut Interest Rates. Their central bank dropped rates from 5% to 4.75% - the first cut in 4 years.
Now today the European Central Bank has followed by also cutting its official rates by 0.25% and these are the first cuts that they’ve instituted since 2019. Is it a co-incidence that these rate cuts happened on opposite sides of the world just 1 day apart? I think not. The tide is turning and people need to pull their heads out of the sand and get with the program. The Bankers are making their move and they are doing it together.
The US Federal Reserve is currently not expected to cut rates until perhaps September, but I still think they will cut in July. There’s an election coming up and the powers that be are desperate to convince everyone that the economic situation is under control. A bit of juicing the economy in the months leading up to November is EXACTLY what the doctor has ordered...
So what does this mean? Well, despite what the Talking Heads on TV might say, Inflation is NOT under control. We still have a pretty severe Cost of Living Crisis going on world wide as a result of Inflation running rampant in recent years. Rate Cuts now will stoke the Inflation beast again...but hey, everyone knows that Inflation lags Rate Cuts by maybe 6 months. So the timing is perfect. We can worry about a resurgence of Inflation next year after the votes are counted...
Which brings me to my point. When Inflation runs wild, what do investors do? Well, if they are smart they invest in assets which have some resistance to Inflation or form an effective Hedge against it. History has shown us time and again that there is no better hedge for Inflation than Precious Metals. Today Silver is up over 4% once again and Gold is getting a bit of a pump too.
It’s not that hard to figure out what’s written in the Bankers Playbook if you’re paying attention. Rate Cuts leads to Inflation which leads to a bid for the Precious Metals. Prepare accordingly.
DISCLAIMER – This is not financial advice
