Precious metals got off to an explosive early start to 2020 as tensions between the U.S. and Iran drove safe-haven buying.

Of course, gold and silver markets will need more than a geopolitical flare up to drive a long-term bull market advance.

The question for investors is whether the fundamental picture now looks promising or fleeting.

In our view, the fundamentals are turning in favor of higher gold and silver prices.

From fiscally reckless trillion-dollar deficits in Washington, to a Federal Reserve obsessed with generating higher rates of inflation, to mining supplies of gold and silver tightening, the ingredients for a big bull market are in place.

Fed Doubles Down on Higher Inflation

With the Fed now on pause with interest rates after having thrice cut in 2019, it is also engaging in massive backdoor debt monetization (“not QE”). Its balance sheet will likely rise to an all-time record sometime this spring, further cheapening the real value of the Federal Reserve Note in the process.

Loose monetary policy should continue being supportive of higher asset prices in general.

During a press conference in late 2019, Fed Chairman Jerome Powell indicated he would like to a see a significant and sustained rise in inflation before hiking rates again.

Earlier this month, John Williams, president of the New York Federal Reserve Bank, said the Fed should consider “doubling down” on its inflation target – pushing consumer prices higher by reinforcing public expectations that the Fed will remain accommodative.

Higher inflation coupled with low interest rates could potentially be rocket fuel for precious metals markets.

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