Is Your Portfolio Ready for Higher Inflation AND Rate Cuts? - Fat Tail Daily

Rate cuts and rising inflation? Welcome to the new era of central bank monetary policy. A period that’s set to decimate real returns on cash investments. But offer rocket fuel for commodity markets, especially gold. Read on to find out why…

This caught my attention from Reuters last week:

‘Bank of England cuts rates, sees higher inflation and weaker growth.’

Read that headline carefully…

The Bank of England (BoE) is cutting rates despite seeing higher inflation!

According to the piece, the BoE lowered interest rates by a quarter of a percentage point, saying the sharp upward revision to its inflation forecasts for this year will prove ‘temporary.’

You can visit the article here.

Mining Memo’s Take

You should be fully aware now that today’s inflation is NOT ‘temporary’ at all.

So, why does that matter?

While it’s still early to call, this may signal a potential reversal in strategy for central bankers.

An acceptance that global inflation remains stickier than many thought.

But the key difference now (compared to the last few years) is that the BoE has decided to cut, not raise, ahead of inflationary threats.

While the BoE represents just one central bank, given that the West has been united in its monetary policies, the BoE’s latest move could be a sign of things to come…

Including here in Australia.

And it’s not too hard to figure out what happens in this environment.

Rate cuts and higher inflation… This is not the time to be hoarding cash.

To put it simply, the REAL rate of return on cash-like investments will decline as central banks cut rates. Meanwhile, the value of that cash will devalue thanks to inflation.

It’s the perfect storm for cash. And a terrible outcome for savers.

But this is the set-up I’ve been warning about for years.

One of the catalysts that I believe will drive the commodity cycle into a bullish phase.

That’s because hard assets hold their value as cash devalues.

Is it any wonder then, that gold is storming higher and approaching US$3,000 for the first time ever?

Given that gold is a major leader in commodity bull markets, it’s a very bullish move for resource markets broadly.

My colleague Brian Chu agrees.

But he still sees plenty of room for gold to move higher.

According to him, 2024 was simply the first phase of gold’s long-term move.

Tomorrow, he will detail why investors should be preparing for gold’s SECOND bullish move.

This is a timely presentation and well worth watching.

You can find out all the details in tomorrows Fat Tail Daily.

Enjoy!

Regards,

James Cooper,
Editor, Mining: Phase One and Diggers and Drillers

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

James Cooper has been a working geologist in mines across Australia, Canada, and Africa since the early 2000s. He’s led the operations of tiny explorers through to huge producer outfits. He’s seen booms and busts firsthand and he also understands the cyclical nature of individual commodities. For example, James was right there when Barrick Gold launched an enormous $7.5 billion takeover bid for Equinox. That was the peak of the last cycle.

With his background as a geo and finance professional, he brings a unique insight and experience to Fat Tail Investment Research. He writes the broader resource-focused investing letter Diggers and Drillers and the ultra-speculative explorer-focused trading service Mining: Phase One.