In the latest Goldnomics latest podcast, we consider whether the gold price will reach $10,000 per ounce in the coming years and what factors will drive prices.
Watch on YouTube or read the quotations and transcript below.
Dave: Hello and welcome to the Goldnomics podcast where we look at global markets through the lens of precious metals. And you can keep your eye out for new episodes on iTunes, on SoundCloud and also on YouTube and you can like us on Facebook and follow us on Twitter.
And wso far in this series of podcasts we’ve looked at 2018, and what developments we can expect in the global financial markets for 2018. And then in our last episode we asked the question:“Is this the greatest stock market bubble in history?”
This month we are asking the question: “Is the gold price gonna hit $10,000?”
And as usual I’m joined by Stephen Flood, CEO of GoldCore and Director of Research and well-known precious metals commentator Mark O’Byrne. Gentlemen, welcome once again.
Mark: Hi everybody.
Stephen: It’s great to be here.
Dave: Now is the gold price going to $10,000? – $10,000 Mark really?
Mark: Yeah, who knows, I don’t know, you don’t know, Steve doesn’t know, nobody knows and nobody can predict the future and that’s always the first point that we always make.
We can’t predict the future we cannot predict the future price of any asset. But generally over time assets tend to appreciate, not because they are appreciating per se but because fiat currencies are losing value over time.
So, I mean that’s the first core point that has to be made but I suppose when forced to make calls on these markets which sometimes we are – we take part in the Bloomberg gold survey and we take part in the Reuters precious metals poll and we’re polled about the outlook for these prices – we have a fairly good track record in this regard over the years.
So, when we look at it, I mean, you have to be bullish it in the world we live in today. In terms of we looked in the previous podcasts at the “The Everything Bubble” and the stock markets and their overvaluation. We see both stock markets and bond markets as overvalued and I think in that context and a lot of other factors particularly geo-political factors I think the outlook for gold is as bullish as it has been a long time.
Possibly as bullish as it was in the early 2000s. So, yeah, I think we’re both of the view that is going higher and the question is how high and over what time frame really?
Dave: Right, so what time what time frame are we looking at here do you reckon?
Stephen: Next hour or so, who knows!
Mark: It depends what Trump tweets!
Dave: Steve, I’ll drag you in on this here. So, do you see it going to $10,000 an ounce?
Stephen: Oh yeah, no doubt. And the time frame it obviously is very difficult to pin down. Short term you’ve got the futures markets playing a huge role setting the gold price. The paper gold, market chasing the physical gold market. It’s like the tail wagging the dog. So, short term I don’t know where it’s going to be but I do think the long-term fundamentals are very supportive of higher gold prices, i.e. lower currency values. We’re in a world where currencies are competitively being devalued, they’re being printed. Politicians and central banks are paying the bills of today with the money of tomorrow and they’re their impoverishing savers and pensioners in in the process. So, you know everything that’s physical, everything is tangible and gold is one of those, is going, its monetary price is going to rise with that backdrop.
Dave: Right. Okay, and I suppose to give a bit of a framework on this, we probably have to look at it through a number of different angles. I mean geopolitics is probably one of the key drivers for this is. Would you agree on that?
Mark: Yeah, that would be one of them. I think that the monetary aspects would be bigger and monetary policy and the scale of quantitative easing we’ve seen, just the destruction of the central bank balance sheets, you know that’s probably a bigger factor.
We tend to look at it through the lens of four key factors. One is the monetary side of things, the other one is geopolitics and then the systemic side of things – MSGM – and then there’s the macro.
So, the macro is the wider economy and we’re gonna have a recession, or depressions, or booms or busts and do we have inflation or deflation – the wider macroeconomic backdrop. So, they’re like the four fundamentals that you need to evaluate the market. And I think if you look at those four fundamentals….. And the final thing and then is actual supply and demand in the gold market and all those factors that drive the supply and demand in the global gold market.
Dave: So, let’s take that one then from the top. So, we’re looking at monetary policy primarily as your key driver, do you think?
Mark: Well I think so, yeah. And oftentimes that reacts to these other factors but I think it’s the prime driver over the medium and long term.
Dave: A monetary policy and quantitative easing is something that we’ve mentioned in the last two podcasts. But just in case our listeners haven’t listened to either those podcasts, and I would recommend you going back and find them and have a listen they’ve very good content in both of those, give me give me a 30 second explanation just of the quantitative easing and the monetary policy impacts on the gold price and we can expand on that from there?
Mark: Thirty Seconds? That’s ambitious! I mean yeah, basically the central banks have printed a huge amount of money and increased the debt load.
The debt is in effect being transferred from the private sector to the public sector and yet the debt has just gone pretty much parabolic. I mean when you look at the charts it’s incredible. And we covered the debt to GDP ratio in the US in the recent podcast.
In most Western economies and indeed at a global level now that global debt to GDP ratios or over 300%. So, debt is going up very sharply and it’s nearly a straight line up at this stage, whereas GDP seems to be evening out.
We’re not getting…. Before when you increase debt you’d get a leverage return on the increase in debt whereas now you’re not getting that return and so, it just makes the economy very vulnerable.
And Jim Rickards puts it well. He talks about 1998, when Wall Street bailed out the hedge funds LTCM, the biggest hedge fund in the world. And then in 2008 Wall Street got bailed out by the central banks. Now the central bank’s balance sheets are massively impaired and they’re potentially in big difficulty if you get another crisis which seems to be a ques