This article was contributed by Crush The Street. 

The drivers for gold in the 2021 year are clear, in my opinion. 

Starting on June 28, banks will require a provable one-to-one ratio of physical gold. This has to do with the Basel III rules that are being enacted this year.

This is expected to lead to a sanctioned gold reevaluation, making unallocated paper gold riskier and more expensive while ultimately driving physical gold demand, and therefore the price, much higher.

Another driver is low Treasury bond yields. The 10-year U.S. Treasury note yield reached 1.5% earlier this year and rattled mainstream headlines, but it has stabilized at that level and the Federal Reserve has made it abundantly clear that raising interest rates WON’T be a priority.

As for the Fed, its record balance of nearly $8 trillion has nearly doubled in size since March 2020, mainly through its massive $120 billion-a-month program to buy seemingly “risk-free” Treasuries and agency mortgage bonds.

These figures are vital information for gold investors because each fresh round of quantitative easing (even if Fed Chairman Jerome Powell refuses to call it that) makes government bonds less attractive as a safe-haven investment and gold, in comparison, looks better than ever.

We can compare the Fed’s desperate asset-buying binge to an airplane heading straight into the sky but running out of fuel. We’ve never landed the airplane to refuel, and Jay Powell continues to look for ways to do this in the air.

The 50 states and Washington, D.C. are set to receive $195 billion, and local officials are salivating at the thought of spending all that money.

From broadband Internet connectivity to water projects and even free college tuition, governors and other politicians have effectively already spent the funds before they’ve received them.

It’s all part of a helicopter money scheme of epic proportions: if you can believe it, the federal government has pumped about $4 trillion into the U.S. economy since the pandemic began in March of 2020.

That figure will soon be raised to $6 trillion since another $2 trillion of Congress’ approved COVID relief packages has yet to be disbursed, according to the Committee for a Responsible Federal Budget.

There’s a whole lot of pent-up energy in all of the stimulus that’s been printed up until now. Expect more spending in 2021 – spending by individuals, businesses, local governments, and undoubtedly the federal government as well.

Naturally, all of this spending will have consequences – it’s already having consequences, in fact. Unfortunately, some folks who think they’re getting “free” money from the government don’t realize that there’s a substantial cost in terms of higher consumer prices.

Year-over-year, the prices of essential goods are absolutely skyrocketing:

Gasoline: Up 47%
Crude oil: Up 31%
Heating Oil: Up 8%
Lumber: Up 70%
Corn: Up 54%
Wheat: Up 41%
Sugar: Up 14%
Cotton: Up 12%
Lean Hogs: Up 56%
Beef: Up 12%

This puts the American middle class in the hot seat but it also puts gold owners in the driver’s seat. It’s a terrible time to hold large amounts of cash for the long-term, but what’s bad for the dollar is a powerful tailwind for gold.

I truly do believe that the mining stocks will give us the levered exposure to the underlying metals when gold and silver have their material outsized move. 

I’ve recently covered Blue Lagoon Resources (CSE: BLLG & US: BLAGF), and I feel privileged to have been introduced to the founder of the company, Rana Vig.