By Ben Davies, CEO of Hinde Capital

September 15 (King World News) - At face value it would appear that money velocity is falling and central bank balance sheets have expanded dramatically in the last few year. The reality is a surfeit of credit money has found its way into financial assets. What we are really experiencing is the invisible signs of inflation as fundamentally public sector financing is merely propping up an ailing global economy. It is creating an illusion that all is ok.
Stock markets are having a hard time declining from these levels because of this surfeit of money. During the Mexican Peso Crisis of 1994, the stagflation of the 1970s or more recently the hyperinflation of Zimbabwe, we witnessed similar behaviour. Far from stock markets collapsing they rose dramatically even in the face of extraordinarily poor economic output. This was in nominal terms, but in real terms i.e. adjusted for inflation they collapsed in value. So I repeat, these are the classic signs of invisible inflation. We expect real assets such as gold and silver to lead stock markets higher, as global currency creation continues to debase the indices of leading asset classes.
Looking at the chart above, we can see that gold is extremely undervalued relative to the S&P 500 adjusted for total returns (dividends reinvested).
We believe gold will readjust versus the S&P 500 with both ultimately rising to higher levels. The fact is that gold will outperform the equity markets around the world many times. The recent interventions in currency markets by leading G7 central banks, namely the Swiss National Bank and now the Bank of Japan has produced yet more unsterilized amounts of currency to chase an unchanged supply of assets. More money chasing less assets equals only one thing: higher nominal prices.
We are at an inflection point for world markets as the issuance of sovereign debt and the consequential proliferation of currency has left gold as the only viable store of value.
KingWorldNews.com