Consumers continue to face rising inflationary pressures, with the core CPI index rising 3.1% year-over-year in July. However, one market analyst said this inflation is just one small part of a much larger backdrop of waning fiat currency purchasing power, which will continue to support long-term demand for gold.

Thorsten Polleit, Emeritus Professor of Economics at the University of Bayreuth and publisher of the BOOM & BUST REPORT, recently stated that gold and silver are on the verge of a major structural breakthrough due to the unrestrained growth of the paper money system.



“ People are desperately trying to get to safe haven assets,” he said. “People are becoming skeptical of the purchasing power of all fiat currencies, and we can see that in the global gold market. ”

Not only is gold steadily rising above $3,300 an ounce, but it is also hitting a record high against the Japanese yen and is close to record highs against major currencies such as the British pound, euro, Canadian dollar and Swiss franc.

" Debt is rising everywhere in the world and that's driving inflation," he said. "It's not just the U.S., government debt is rising in Canada, the U.K. and Europe."

Polleit noted that in this environment, central banks cannot raise interest rates because doing so would increase the cost of servicing all that debt, thereby curbing economic growth.

But that’s just the beginning; Polleit said he expects central banks will not only have to cut interest rates this year but also return to financial repression and possibly yield curve control.

Financial repression is an indirect way for governments to use funds from private enterprises to repay public debt. Governments use subtle tools such as zero interest rates and inflation policies to reduce their own debt.

Polleit’s dovish outlook comes as the Fed maintained a neutral monetary policy stance in the first half of the year, a departure from most major central banks.

The market currently expects a 25 basis point rate cut next month, with a 60% chance of two more rate cuts before the end of the year. Although market easing expectations have increased in recent weeks, the 10-year Treasury yield remains relatively high, with key support above 4%.

Polleit said it was not surprising that yields remained high because investors needed to see greater rewards for the risk of rising debt. But he added that he believed the 10-year Treasury bond was capped and he did not expect its yield to exceed 5%.

Polleit said the Fed may hope that lowering short-term yields will also pull down long-term yields.

“If that doesn’t work, if long-term interest rates don’t come down, I think it’s very plausible that central banks will start buying bonds again,” he said. “Once yields come down, you’re going to see further appreciation in gold prices. The potential and momentum for gold is so great that I expect it to be higher by the end of the year.”

In the long term, he wouldn't be surprised to see the price of gold double in the next five to 10 years.


Spot gold daily chart Source: Yihuitong

At 14:58 Beijing time on August 14, spot gold was quoted at $3361.79 per ounce.