A Currency Crisis Could Drive Gold to $10,000 An Ounce
The comments below are an edited and abridged synopsis of an article by Valuewalk
The Fed has rolled out unprecedented stimulus in a very short time, which could result in a currency crisis that pushes gold to $10,000. Daniel Oliver of Myrmikan Capital argued in a note that the stimulus could end up doing little for the working class, middle class, and small businesses.
Up for discussion: dramatic Fed moves; money flows to financial speculators; and a currency crisis could see gold prices go skyward.
Oliver sees three possible outcomes to the stimulus measures rolled out by the Fed and Congress: policymakers can’t keep the inverted credit pyramid from tipping over because of a huge dollar debt overhang; the lockdowns end because the economic costs are too high; and, finally, gold rises due to a currency crisis. Oliver sees gold bullion climbing toward $10,000 in this case, and breath-taking increases in gold mining stocks. Once again, the credit granted to businesses by the government doesn’t have much effect.
The middle class may be wiped out, and the Fed would take massive losses on its loans. Oliver predicts that the broader markets and real estate plunge at least 90% against gold. A currency crisis would be the ideal situation for gold miners, as the metal rises in both commodities and nominal price.
When the dollar plunges, almost all other global currencies will collapse too, because most central banks use the dollar as their core reserve asset. In the case of a currency crisis, gold will end up being the only non-local currency.