from Birch Gold Group:
This week, Your News to Know rounds up the latest top stories involving precious metals and the overall economy. Stories include: Gold gains $100 in a week, gold’s gains are causing analysts to reassess the world order, and what are BRICS members Russia, China and India telling us about gold?
Gold has been going up so fast analysts can’t keep track
To give you an idea of how explosive gold’s move up has been, we have this analysis dated April 5, which comments on how gold pulled back from a $2,305 record the day before to $2,271. “Too much, too soon?”, wonders the author, stipulating that gold might be seeing downwards pressure from a strong U.S. dollar and expectations of strong U.S. jobs data.
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Since then, gold’s price has recaptured that high and moved to $2,350, yet another all-time high, before again slightly pulling back. Gold has already exceeded many forecasts for the year. It has gained around $100 over the past week. And it’s up 42% from last summer, when gold stayed around $1,650 for a while and one had to dig pretty deep to find a positive story. (By the time this article goes live we may already have a new record – check today’s gold price here.)
Now, we were quick to point out that $1,650 wasn’t a “low” price, whether relative to historic pricing, the hiking cycle we were in or the summer doldrums that gold is well-known for. We noted how, despite all this, headlines would have one believe we were trading $165 gold, not $1,650. Mainstream financial media is not a fan of gold, as I’m sure you’re aware – and declines in gold’s price are publicized about five times more than gains. (There are complicated reasons for this; perhaps we’ll explore them in the near future.)
But this year’s gains have, to a degree, surprised even the staunchest gold bulls. We’ll briefly address the technical side of the “correction” camp before moving on to more bullish views.
There is still no real correction call consensus. More to the opposite, with the likes of JP Morgan and Goldman Sachs expecting even higher prices. But some are nonetheless worrying about the lofty price expansion, expecting a pullback for the sake of it.
This brings up a natural question: if gold is now in a bull market, what is everyone going to pretend bear levels are? Are $1,900-$2,100 going to become lamentation levels? It’s a funny thing to consider, but also very important to note during a time when we’re being told that the U.S. dollar is strong and inflation is being kept in check. Clearly, the price of gold disagrees, whichever way it might head next.
On the flip side, FX Empire’s AG Thorson calls sub-$2,000 levels a thing of the past and isn’t in the slightest convinced that gold is overblown. The opposite: he says gold is starting a bull run that is to last until 2030, backing it up with some interesting charts.
One is that the last upswing of this magnitude happened in 2005, when gold moved past $400 permanently. If this analysis is correct, Thorson says that investors should be preparing for a long-term price level of $8,000 to $10,000 by 2030.
This is something else we’re eager to reiterate. Until very recently, one might not have found calls for $8,000 to $10,000 gold that easily. They were there, but often on smaller, truly far-out goldbug outlets. Now, they are headlining serious analytical websites!
Regardless how much of that $10,000 price target gold ends up gaining by 2030, just the reminder that gold left $400 as recently as 2005 and now appears to have done the same with $2,000 should, first and foremost, be a note on currency depreciation. In less than two decades, your dollars have only held onto a fifth of their value. The rest vanished. If nothing else, it seems a safe bet to expect more of the same in the years ahead.
All the more so, since the monetary policies of 2005 can be called conservative compared to the current “one step away from Modern Monetary Theory” approach.
Are BRICS behind gold’s massive price move?
Conflict in the Middle East has been heating up, and some have again attempted to tie it to gold’s price gains. The correlation is probably there. But in what seems like a far more reasonable explanation, experts have turned to BRICS as a kind of ultimate explanation for anything unusual in the gold market.
A panel of experts tackled this issue on Kitco recently, with this choice quote from Frank Giustra, CEO of Fiore Group:
“No one wants war, but here’s the problem — the U. S. is facing an existential threat. It’s a national security issue,” he said. “If there’s a sudden move towards replacing the U.S. dollar, meaning perhaps a BRICS announcement of a new currency [backed by] gold, I think then it would react quite violently.”
Nevermind the economic side of things: Giustra is concerned that the U.S. might retaliate with force as its global superpower status is wrestled away. It’s hardly unprecedented, as wars tend to be fought over money one way or the other. But it’s probably unlikely.
Still, Giustra’s wording tells us just how entrenched the belief is among experts that BRICS is making a move. Instead of wondering “if”, many have already leapt to: “What will the fallout be like?”
Another analysis on Kitco on the same issue is a little more grounded, with even more industry experts chiming in. To put a very long story in a few bullet points:
- The lack of Western growth and sound monetary policy has given comparatively undeveloped nations that sit on a lot of commodities a bid for power
- SWIFT was never meant to be used for international sanctions, and China’s Cross-Border Interbank Payments System (CIPS) is just one alternative being developed as a result
- Gold could easily end up as a settlement method on these platforms since the nations own a lot of it and are generally betting big on bullion
- BRICS currency can’t happen unless it’s back by gold, as another fiat can’t hope to take the U.S. dollar’s place
Between the aforementioned analyses, those in the former are far more bearish on the U.S. dollar and its prospects than the latter. But those in the latter are basing most of their opinion on the belief that the U.S. truly does have a gold hoard of over 8,000 tons, and Russia and China “only” 2,000 each.
