Is It Possible To Reach The Gold Price To 4 Thousand Dollars?
Gold, which set a new record at the end of the week, exceeded the all-time high of $ 1,920 in 2011. Frank Holmes, CEO of An US Global Investors, said that the gold price will not stop until it reaches $ 4,000. Holmes’ predictions seem to be important nowadays when monetary measures are taken.
Breaking all-time highs in multiple foreign currencies so far, gold has reached new heights in US dollars for the first time since 2011. So much so that ONS price of spot gold was traded at $ 1,944.
What was the status of gold in 2011?
In 2011, gold, which had reached unprecedented levels until then, could not remain at that level. The yellow metal, which entered a long-term bear trend that started in December 2015, almost retreated.
The point that has been reached since the summits seen nine years ago should be taken into consideration. Because 2011 was the time when gold was at its peak and it was 3 years after the last Great Recession period. Gold was in the final stages of a 3-year bull rally that started in November 2008 in the early stages of the economic contraction.
Since 1979, there are 5 stagnations determined by the National Bureau of Economic Research (NBER), including the current stagnation that started in February 2020.
At the end of the two periods of stagnation, as can be seen from the graph, that the previous 4 states of recession did not show any recovery; It entered a bull market during the recession in 2011 and 2008-2009.
The chart above shows the Federal Reserve fund rate (blue line) as well as the gold price (orange line). FED and gold funds, which progressed rapidly from 1979 to 2008, followed a downward trend in gold as the interest rates showed a long-term secular decline from the late 1970s to the mid 2000s. The long-term bear cycle in gold prices hit the bottom in the early 2000s; It had increased steadily, with rising interest rates until 2007.
The first deviation between gold and interest rates occurred in 2008, when the onset of the recession led to several rounds of quantitative easing and interest rates remained close to zero until they rose in late 2015.
During the Federal Reserve’s pigeon policy era, which dropped rates unprecedented so far, gold continued to rise until it saw its peak in 2011.
What makes the 2000s different from the previous decades is the great crisis in gold prices with the big crisis in 2008 and the coronavirus (Covid-19) pandemic in 2020.
On the subject, Holmes said the following in the interview:
” In the next three years, if we look back, if history recurs, gold has risen from $ 750-800 to $ 1,900 in this three-year period, from 2008, 2009 to 2011. If we estimate that we have the same expansion of the Fed’s balance sheet, then there will be projections. If the loops are exactly the same, gold can go up to $ 4,000. ”
Despite the record precautions put on the market by FED, Holmes stated that the quantitative expansion will not stop until the balance sheet of the central bank exceeds 10 trillion dollars.
” This will cost the US government about $ 10 trillion in fiscal and monetary policy to return to the economy, so remember that the figure you see after Lehman Brothers went bankrupt after 2008, 2009 is $ 1 trillion to $ 3 trillion. I think it will reach $ 10 trillion in total. ”
There is one more who agreed Holmes in the long-term bullish forecast. Dan Oliver, the founder of Myrmikan Capital, who thinks prices can see $ 10,000 per OUNCE, said:
” As you know, there is a big buying spree due to the virus situation, and therefore the ounce price of gold is increasing proportionally, and therefore the balance sheet needs to be balanced at the moment. That’s why I changed my forecast for gold fiat to $ 10,000. ”
Some analysts think prices are getting too hot in the short term. One of them, Sprott US Manager Rick Rule, says in an interview:
” If you ask me about my gold price outlook over a two-year or three-year period, I am rising wildly to the point of rising. If you ask me about my gold price outlook for the next two months, I suspect that this level may have come too fast, too fast. ”
In addition, Rule added that investors may expect much volatility for gold in the coming months.