This week brings us gold price forecasts you could call outrageous, ranging from $3,000 to $40,000 per ounce. Outrageous, that is, until we remember that there’s no actual limit on gold’s price…
By Peter Reagan, for Birch Gold Group | Reading time: 8 minutes
Key Takeaways
- Gold prices could realistically reach $7,000 to $40,000, according to experts
- The U.S. may be deliberately weakening the dollar to boost exports
- Gold is unique in its inability to go to zero, making it a safe haven asset
- Accumulating more physical gold and silver during price drops is wise
This week, a video-heavy installment of Your News to Know rounds up the latest big stories involving precious metals and the overall economy. Stories include: Why there’s no such thing as an “outrageously high” gold price prediction, speculation on short-term gold price manipulation and gold’s shift from global commodity to global money.
$7,000 to $40,000 gold isn’t a fantasy – here’s how (and why) it could happen
Now that $3,000 gold is a standard Citi forecast, we might want to see what the real upside is about. These days, we can find forecasts ranging from $7,000 to $40,000, and they aren’t issued by random people on X, but well-regarded industry analysts.
Whenever I see a truly astonishing gold price forecast, I remind myself of something noted economist Kenneth Rogoff wrote back in 2016:
Gold, despite being in nearly fixed supply, does not have this problem, because there is no limit on its price.
This is usually paraphrased by the randos on X as:
“There is no limit on gold’s price.”
That’s fairly close to Rogoff’s actual words – which were presented in the context of advising emerging nation central banks to buy gold.
Why?
Well, essentially, because it’s the only financial asset that cannot go to zero.
According to Rogoff, it’s also the only financial asset that can go to infinity. (At least when measured in terms of currency.)
Consider reading Rogoff’s original article — and, if you find yourself feeling skeptical, remember he’s a Harvard economist, former chief economist of the International Monetary Fund (IMF), a former economist for the Federal Reserve, co-author of the fantastic book This Time Is Different and a chess grandmaster. He’s a smart guy.
Recently, Luke Gromen, founder and president of research firm Forest for the Trees (FFTT), explained to Kitco why $7,000-$15,000 is his gold price to watch.
Gromen is straightforward: He says that, if you listen, the official sector openly claims that the U.S. dollar is being devalued deliberately. Gromen believes the federal government wants a weaker dollar. This would make foreign imported goods significantly more expensive – and conversely, make exported U.S. products more affordable. A weaker dollar would arguably help the nation return to an export-based economy.
Remember when Donald Trump said back in 2016 that he wanted a weaker U.S. dollar for trade advantages? That’s why.
The U.S. economy, once known as an exporter of top-quality goods, now primarily exports nothing but debt. So the reason is there, as well as an open concession. The U.S. monetary authorities want a weaker greenback, considerably so. How much? Gromen lists a range of $7,000-$15,000 for gold based on this, but still doesn’t believe the greenback will be replaced.
So does Daniel Krupka, Head of Research at Coin Bureau, who finds the end of the petrodollar agreement to be almost a non-event.
So instead of even just losing its global reserve status, let alone being evaporated totally, we might be looking towards a deliberately weaker U.S. dollar but elsewhere unchanged in its role. Is it that strange of an idea? If Japan can get away with hammering the yen to a 1:157 ratio against the greenback, why couldn’t the U.S. afford to drop it to a third of its value? And that is all that would be needed for Gromen’s forecast to materialize, which he expects to happen around 2030.
On the more extreme side we have Lynette Zhang saying that gold could go as high as $40,000. But how extreme is it? In her very elaborate overview, Zhang notes that $40,000 gold is actually its fundamental value relative to U.S. dollars and U.S. debt.
Watch here:
In other words, all it would take for gold to hit $40,000 is for the Federal Reserve to have any kind of accountability. (Some of the commenters of Zhang’s interview aren’t happy with the idea, saying that $40,000 gold will only mean that the U.S. dollar has collapsed or is worthless.)
But will it? It takes 366,000 Japanese yen to buy an ounce of gold. The yen is no peso, remember: it’s called both a “safe haven” and is a member of the SDR’s basket. It’s the #3 most traded currency in the world!
So how do we get to $40,000 gold? More of the same – in other words, exactly the way we’ve gone from $35 to $2,300 gold.
Gold’s shaking out weak hands
Weak hands, paper hands – these are terms you might’ve stumbled across in finance commentary. They’re most used in the notorious Reddit forum /WallStreetBets as well as the cryptocurrency market. Crypto provides a great case study of weak hands — in just watching the top coins, we can see it happening over and over.
Bitcoin goes up massively, then headlines blare that a bear market is here. Bitcoin goes to $70,000, then traces back to $16,000, then goes back to $70,000. The smart money, or the available money, held on and doubled down around the bottom and made tremendous profits. If you believe in the asset, a price drop is an opportunity to lower your cost basis. To load up on an asset you want anyway, at a bargain price.
The crypto market moves much, much faster than traditional asset markets. Do these same lessons apply to gold? We aren’t exactly used to this idea, especially given that bullion investors are almost all what the crypto community calls “HODLers.” They buy and hold, often forever.
With that background in mind, James Turk, founder of Goldmoney Inc, recently spoke to KingWorldNews over what he sees as a clear instance of manipulation of gold’s price. Turk explained his thinking in great detail – here’s a capsule summary.
Turk went over gold’s fall by nearly $100, making some important points along the way. He mentions headlines, which have been overlooked in a sense in terms of impact. Here, we are told “Gold clings to recovery gains at around $2,330.”
It’s a strange and excessively negative framing, isn’t it? Gold has gained for most of the year, and it has now returned to $2,330, the level it’s been on for weeks. Reason would tell us that gold experienced a brief dip in price, the first of the year, which only brought it to $2,995 or thereabouts. Then, it recovered to the same level it’s been on for weeks.
That headline, which is one of many, makes it sound like gold is desperately clinging to its current price! While, in reality, gold’s tailwinds have never been stronger.
Turk doesn’t have the slightest doubt that both gold and silver were manipulated downwards, saying that silver still held onto its real breakout level of $28. He says that the idea of bear markets in gold is essentially ridiculous, as gold has been in a bull market by definition for 110 years since its hard tether to money was removed. And he reiterates our own editorial stance:
[Any time money was debased], it was considered a crime against humanity. So 2% inflation target, it’s an outrage that they’re even thinking that 2% is a target. There shouldn’t be any inflation.
The easiest way for an individual to combat this crime, it would seem, is to try and get your hands on physical gold and silver. Turk says the accumulation of physical precious metals should be a lifelong goal for everyone. He thinks it’s a mistake to treat physical precious metals as just another asset class.
While there are hits like this in every bull market, many of gold’s recent stories raise eyebrows as to the nature of the price assault.
We’ve just recently covered the story of pundits saying EV manufacturers might soon bid up prices of silver due to the metal’s increasing scarcity. Do the market manipulators hope to lessen the amount of individuals with exposure to gold bullion by luring them to “sell high” because of crashes and worrying headlines?
And might then that gold, smelted or not, find its way into the vaults of any number of central banks that have been piling gold by the hundreds and thousands of tons? While we have heard of some recent profit taking on the retail front, we’re nonetheless happy that gold bullion investors are mostly immune to this kind of manipulation.
Rosenberg: Gold, once a commodity, is now viewed as money
In a reasonably broad commodity video, David Rosenberg touched upon the idea that we might need to reconsider gold’s classification as a commodity, stating that investors are increasingly treating gold as money.
See for yourself:
Rosenberg, who previously worked as Merrill Lynch’s Chief North American Economist, says the signs are there for anyone wanting to see them. For starters, he mentions that gold has broken tradition by moving up along with the U.S. dollar, which seems to go against most fundamental market forces we’re told of.
It can only be explained if gold has, on some level, turned into money once again and we aren’t being told. Rosenberg holds onto the idea that the Russian sanctions really triggered this, making no counterparty risk the most attractive trade. But there are many more layers to this story.
He goes over some of them, saying that investors buying gold now are probably aware that our economic cycle is peaking. So it won’t just be an issue of inflation, but rather where to park one’s money for any kind of shielding. Rosenberg also reiterates what we bring up often: the longer the Federal Reserve waits to cut rates, the more it will have to cut, and what that means for gold is pretty straightforward.
Rosenberg is also highly interested in India’s gold consumerism, saying that nary is an Indian party or gathering without significant amounts of physical gold on display. If we are to believe official figures, both India’s economy and population are growing pretty rapidly. That has to mean something big for the gold market moving forward, but we’ll leave the “how big” open to interpretation.
Watching Rosenberg try to give a price target for gold’s current run, he almost looks as if he was asked to price some very valuable antique. But while noting the difficulty of fully covering the upside, he says that his company views $3,000 as an absolute minimum price peak during this cycle. Not bad for a podcast that mostly discusses industrial commodities!