panic button crisis

Pending Crisis Calls for Gold

July 6th, 2016 by

If you haven’t heard about the coming global monetary crisis yet, you don’t need to venture to the farthest corners or darkest depths of the Internet to find out. Sources in the mainstream media like Business Insider and CNBC have even been picking up on this concept. The signs abound that this pending crisis could be nearer than you may initially think.

The common thread of virtually all of these predictions about the failure of the world’s financial and monetary system is that the price of gold will surge as a result. This is the natural consequence as people turn to hard money during times of turmoil.

Death of Paper Currencies?

Burning EuroWith increasing frequency, commentators from across the news media have posited the idea that gold is the ultimate safe haven. This has become especially pertinent with the appearance of negative interest rates and negative-yielding bonds in two of the world’s largest economies, the European Union and Japan. (It’s worth noting that even the 10-year Treasury note is offering an all-time low yield.) Moreover, the foreign exchange (forex) markets have experienced extreme volatility in the aftermath of Britain’s vote to exit the EU (“Brexit”).

Ultimately, gold is proving itself to be the only safe ground under these extreme circumstances. Chris Wood of investment bank CLSA explains:

“This is because the view here remains that central banks, including most importantly the Federal Reserve, will not be able to exit from unconventional monetary policy in a benign manner and will remain committed to ongoing balance-sheet expansion in one form or another. Such policies will ultimately discredit central banks pursuing unconventional monetary policy, threatening the stability and indeed integrity of the current fiat-paper-money system.”

“The New Case for Gold”

Fiat currencies—money that derives its value merely from government decree and is not backed by anything with intrinsic worth like gold—have all been on a trajectory toward worthlessness. Over the last century, for instance, the U.S. dollar has lost more than 95% of its purchasing power to inflation. By contrast, the relative value of gold has been remarkably stable over the course of human history. This is why it is often cited as a hedge against inflation.

James Rickards. Source: Business Insider

James Rickards. Source: Business Insider

This is the view of bestselling Currency Wars author James Rickards, who has long advocated for returning to a monetary system backed to some degree by gold. Like Wood, Mr. Rickards sees the instability of central banks and their increasingly unconventional policies as the eventual cause of fiat currencies’ demise in the form of a global monetary crisis. He lays out this case in his latest work, The New Case for Gold, which deftly knocks down much of the so-called “conventional wisdom” against gold’s usefulness as a monetary asset.

Bold Predictions About Gold

These myriad factors have culminated in some rather startling predictions for where the gold price will end up in the next few years. The managing director and chief investment officer (CIO) for Swiss Asia Capital’s Singapore division, Juerg Kiener, is calling for the yellow metal to reach a new record-high within the next 18 months. Interestingly, he arrives at the exact same price point as CLSA’s Woods: $4,200 per ounce.

panic button crisisMeanwhile, legendary contrarian investor Doug Casey has recently called for gold to approach $5,000/oz when the monetary crisis begins to unfold. In essence, the rationale for all four of these aforementioned forecasters is the same. They each see a crumbling global monetary regime, bloated with debt and backed by nothing more than the “good faith and credit” of national governments, as inevitably leading toward a return to gold as the world’s ideal store of value.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.