Ann: Carosue Dam and Thunderbox only - Reserves rise to 3.7Moz, page-119

Thanks Eshmun. I reckon it is more inflation expectation which drives the gold price than actual reported inflation. We saw this shortly after the GFC. It didn't take long for the gold price to make all time highs (after its initial fall). You get a liquidity crunch (as we had in March) followed by the familiar central bank response of cutting interest rates and printing money. Gold and to probably a greater extent silver respond favourably to these actions as people anticipate the inflation to come. I personally think inflation is a very difficult concept to define and it can be pretty much anything the person (government agency) calculating it wants it to be. For example I find it hard to reconcile the 500% increase in the gold price over the last 20 years with the benign inflation reported by government agencies. Do you include asset prices such as housing? Do you leave them out? Do you change your "basket of goods", or do you keep it the same? Do you substitute chicken for beef when beef is expensive or do you leave beef in the basket? Do you account for smaller packaging, or do you conveniently ignore it? In my opinion inflation can be anything you want it to be until it becomes a real problem and becomes impossible to mask. Its at that point central banks are powerless to do anything about it and you start to see civil unrest as people struggle to survive.

I agree with you that there is a very real risk of a sharp fall in equity markets which could see everything come off however, it would also be risky to underestimate the determination of central banks to keep this show going for as long as possible. It is amazing to think the S&P 500 has made record highs despite the havoc coronavirus and government intervention is having on the economy. I take your point that it will take ever increasing levels of liquidity to maintain this but I am not entirely sure the Fed in concert with other central banks around the world are ready to throw in the towel just yet (not while they are getting these "cosmetic" results).

We no doubt have unprecedented levels of risk. It is risky to be in the market for sure but one could also make the argument from an opportunity cost perspective, that it could be equally as risky to be entirely out of the market.

I guess only time will tell.