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How High Will Precious Metals Equities and Gold Go?
My sense is that it will be in orders of magnitude far greater than most analysts allow themselves to state or believe. We frequently see price projections of 20 or 50 percent higher than today. Some even allow themselves to suggest that gold will double in price before it has reached its cycle high. We even see a rare analyst allow himself to speculate that gold prices may find and end at the $3,000 an ounce level. Of course a few discredited gold bugs suggest numbers even greater.
Why Am I So Optimistic About the Eventual Price of Gold?
It is an affinity for, and an understanding of, the political mindset that causes me to understand what decision makers will do…and why.
- Because a politician follows the political calendar, s/he only concerns himself/herself with the time horizon leading to the next election.
- Anything requiring decisions beyond the date of the next election will be the responsibility of whoever is on the next watch so major and difficult, but necessary, decisions are inevitably deferred. In their place spending money gives the appearance of concern and of doing something to fix the apparent problem.
- More cynical observers would characterize these actions by the political class and their senior bureaucratic minions as buying time hoping that something positive might magically emerge.
- Those who are super cynical would even conclude give-away programs are designed simply to bribe the voters in order to curry goodwill for another term at the levers of power.
There is no discipline or inclination to do anything of real value to fix the core economic and financial problems. That being the case, new programs, more spending stimulus and money creation will always be the order of the day. Hence the U. S. dollar will devalue and investors will find gold as their best safe-haven refuge.
The dollar will devalue because massive dilution caused by incessant money creation allows future obligations to become more manageable – for government – because it is the only way that it can meet its future obligations for employee pensions, accumulated debt, medicare and social security.
A nominal dollar which buys much less in the future than it does today is still a dollar. Unfortunately the holders or recipients of those devalued pieces of paper will find they are essentially fraudulent promises.
The above realities make gold the closest thing to a sure-bet investment. They are also the reasons why gold will go much higher than most of us allow ourselves to contemplate. Buckle your seatbelts and enjoy the ride ahead!