DGZ

It's monetary inflation (i.e., money supply growth) that determines gold's value, not price inflation.Gold would need to increase to ~$2,400 to get back in line with M2.The U.S. will continue to fund these deficits with more debt and debt monetization. This will result in the rate of M2 growth remaining far higher than historical norms.Physical gold and gold mining stocks remain one of the best options for investors that want portfolio protection from the monetary inflation that is occurring now and that will occur in the future.

Gold has been suppressed by a rally in 10-year Treasury yields.The dollar is still in the driver's seat for gold, however.I expect the dollar to weaken once the next U.S. stimulus is announced.A falling dollar will strengthen gold's price, pushing it above $2,100.

The election cycle and exploding Fed balance sheet will help push gold up.On a number of metrics, gold remains cheap.In the very near term, gold will be pressured until catalysts emerge.  But then it promises to head much, much higher.

In the long run, the constant rise in liquidity injected by central banks to assist the restrictive economies will support assets with limited supply, such as gold and silver.However, the rise in uncertainty over the US elections and new rounds of lockdowns to fight the pandemic will increase demand for safe assets such as the USD.A stronger USD may weigh on both gold and silver in the short run, which have already started to show some signs of fatigue.

Increasing inflation has implications for businesses and workers, but this article will focus on investors.The classic inflation hedges are gold, other commodities, real estate and, some argued, stocks.There are possibilities in all these categories, though investors should not expect any of these to work perfectly.There is no asset that is obviously a slam dunk for an inflation hedge, but gold, mining stocks and farmland should be considered.

Investors are keen on a new potential $1.8 Trillion stimulus package for the economy.The eventuality of the markets tempering themselves from their on/off selling from the stimulus package and election jitters are offering buying opportunities.Equity indexes are up considerably for the week after a large sell-off on Tuesday.

In March, we saw a shift in paradigm with gold going from being a commodity to being a currency, while the US dollar became a commodity.It is a fiat or paper currency. Trust in its value has been falling since 1971 when the US went off the gold standard.It has fallen in value more than 98% since then.Now, we are entering the second phase of this crisis. We will begin to see the magnitude of the damage.Federal aid is ending, and homelessness is going to skyrocket. The system is under extreme stress.

As highlighted in The Lead-Lag Report, conditions for intermediate risk-off sentiment via the Lumber-Gold Signal are almost here. Gold functions well during heightened volatility.India, the largest consumer of gold, is entering the festival and wedding season.Added stimulus and inflation effects bode well for gold.