Central Banks: Gold’s Greatest Allies
The comments below are an edited and abridged synopsis of an article by Jim Rickards
Today’s gold price is nearly double the low of $1,050 at the end of the last bear market in December 2015. That’s impressive, but it’s only the beginning.
Even if you’ve missed out on the gold rally so far, you could still score huge gains as gold trends toward $10,000 or higher over the next four years. Gold at $14,000 is entirely possible by 2026, and Rickards explains how.
It’s not retail investors (apart from a small number who understand the dynamics) who are driving the gold bull market, and it’s not institutional investors (institutional portfolio allocations to gold are typically about 1–2%).
Instead, the steady buying is coming from central banks (especially Russia and China), from the super-rich, and from their wealth managers and portfolio advisors. This is a sea change.
For decades, wealth managers have rejected gold and looked to stocks, corporate credit and alternative investments. All of these backfired when Covid-19 came along. Equity markets have since recovered, due to intervention by the Fed.
But the market is heading for another fall, and the election is a catalyst. Markets are not fully priced for this.
Meanwhile, corporate credit downgrades have been at all-time highs, and that market is being propped up by the Fed in non-sustainable ways. This leaves gold as one of the best-performing asset classes around.
As confidence in the dollar erodes due to money printing and super-deficits, investors are looking for alternative stores of wealth, including gold. As the dollar price of gold begins to soar, investors will notice. Even more people will invest in gold, driving the price still higher.
We like to say that the gold price is going up. But the value of the dollar is going down (it takes more dollars to buy the same amount of gold). This is the real inflation and real dollar collapse most investors miss at the early stages.
Eventually, confidence in the dollar is lost completely, central bankers need to restore confidence, and they turn to some type of gold standard to do so.
If central banks, the super-rich and their advisors are jumping on the gold bandwagon, what are you waiting for?
Gold’s bear market (2011–15) is behind us, and gold is positioned for new highs of over $3,000 per ounce in the short run and much higher over the next several years. The time to go for the gold is now.