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Many gold investors have lost confidence as the metal has failed at several attempts to regain the $1,000 mark and is currently languishing in the $700-$750 range. This 30% decline caught many gold bugs by surprise as the widespread liquidation of assets has hit all sectors and deflation fears rule the moment.
But the total bailout tab, estimated by Forbes to be $5 trillion thus far, will undoubtedly lead to a hyper-inflationary scenario. When this will happen is anyone’s guess, but some analysts are predicting it could take place within the next 3 months and push gold to somewhere between $1,500-$2,000 and oil to the $200-$300 range. I don’t see it happening that quickly and with such magnitude, but I am certain this scenario will indeed manifest eventually. Whether it is in the next few months or next few years, I think precious metals and energy are offering very attractive entry points at the moment. Fire up the printing presses. The bailouts have just begun, with everyone from automakers to airlines getting in line for a government handout of taxpayer dollars.
I am currently short the dollar, long precious metals, long agriculture and long energy. Commodities are oversold and when they whip back to the upside I expect the move to be extremely powerful. Don’t miss it by sitting on the sidelines with cash that is rapidly losing value. If you want to receive my weekly trading alerts, view my portfolio and receive the monthly newsletter with strategies for profiting during the current financial mess, click here.
Steve Watson of Infowars.net wrote the following article which was published on Thursday, Nov 13, 2008.
Economic experts have predicted that rampant inflation caused by government stimulus packages will soon take hold of the economy and force precious commodity prices to all time highs.
Johann Santer, MD at Superfund Financial Hong Kong told CNBC that he expects to see gold climb from its current position at $710 to a whopping $1500-$2000 an ounce within the next three months.
“Should money be going into cash, paper?” asked CNBC anchor Martin Soong, to which Santer replied in the negative:
“Not necessarily, we see that for the time being this remains the right strategy to be in, of course people are quite nervous, but once we start to understand again that it will not really protect us from inflation, which most likely will come in the long run, because of all the stimulus packages, I would assume that we should also start looking at the gold price at the moment and find opportunities there.”
Santer explained that deflation is not going to protect us from what he sees as inevitable heavy inflation in the long run caused by the huge amounts of money being pumped into the market in the name of saving the economy.
Santer predicted that we may even see double digit inflation.
“We better get prepared right away and start to look at real assets, for example gold could be really attractive at the moment, trading at $710.” Santer added.
“At the moment there is a major sell off in everything, people are really looking at cash and treasury bills but in the long run, we will not escape from inflation so we have a medium to long term target of $1500 within the next three months.”
Johann Santer’s prediction mirrors that of numerous other fund managers and top investors such as Jim Rogers, Robin Griffiths and Jurg Kiener who are now predicting that global central banks’ insistence on printing their way out of economic turmoil is setting the stage for a hyperinflationary holocaust, a knock-on effect of which will be gold’s acceleration towards $2,000, as demand for precious metals outstrips supply.
Meanwhile another investor, Puru Saxena, CEO of Puru Saxena Wealth Management, has told CNBC that within the next four to five years he sees oil prices skyrocketing to up to $300 a barrel.
“Over the last few months we have seen widespread liquidation of all assets, nothing has been spared, commodities, corporate bonds, real estate, equities in the emerging markets, the Dow Jones the FTSE, everything has been sold because of distressed liquidation. However, if you look at the supply and demand dynamics of most of the natural resources, whether it’s energy or food or mining companies, they are still very very bullish.” Saxena stated.
He explained that he feels people are only looking at one side of the equation at the moment with regards to the decline in the value of oil, which is currently hovering around the $55 per barrel mark.
Saxena predicts that we are going to see a huge rebound in resources in the next couple of years due to increased demand and reduced supply.
“Obviously no one has a clue where the market will be in two or three years from now, or indeed the price of oil, but over the next four or five years I suspect it will go to over two or three hundred dollars a barrel.” Saxena added.
With OPEC continually cutting oil output it is not surprising to hear such predictions emerging from investors. We have been continually warned that the sharp decline in oil prices is a temporary respite only.
We have previously reported on the corporate elite’s efforts to hike oil prices up to the $200 mark. Earlier this year, a report by Goldman Sachs Group Inc. forecasted that oil prices will reach $150 to $200 dollars a barrel within 2 years. JPMorgan Chase & Co have also predicted that prices could rise to $200 a barrel. Such levels would set the stage for a possibly catastrophic post industrial revolution.
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.”
- Thomas Jefferson
Love that quote from Jefferson. I tend to feel the inflation won’t hit for 12 to 24 months out. Maybe in 8. We’ve got to get through the Presidential honeymoon first.
I also expect inflation, but not for a bit.
Monetary Reflation Today, Price Inflation Tomorrow
(excerpted from my speech to China Gold & Precious Metals Summit in Shanghai last week. For complete text see www.NicholsOnGold.com)
I remain bullish on gold because — even as the global economic recession deepens — governments will find the only way out of this mess is to print more money. In other words, to inflate.
The United States Treasury and the Federal Reserve have already thrown a few trillion dollars, more or less, into the banking system and are now also lending directly to businesses and households. And, there’s surely much more to come when the next Administration moves into Washington.
It’s not only the U.S. monetary authorities pumping up the money supply. Their counterparts in every major economy – including the United Kingdom and the Euro zone, China, Russia, Japan and on and on – are doing likewise.
We have never in the history of money seen such an expansion in its supply without, after a period of time, a rapid deterioration in its value – in other words, without a rapid increase in the overall price level. More than any other factor influencing the gold market, it is the inevitable devaluation of money and the corresponding rise in price inflation that will propel gold skyward in the next few years.
As sure as day follows night, reflationary monetary policies — however necessary — have long-term implications for global inflation. Typically, monetary creation affects price inflation with a lag of six months to a couple of years – and in the current environment, the lag could be still longer . . . so it may be some time before inflation is recognized as a serious problem. But gold prices have shorter lags and could begin moving up before rising inflation becomes apparent or worrisome.
Longer term, gold-price prospects remain as bright as ever — and I firmly believe we will see record high prices in the next few years with gold back over $1000 an ounce in the coming year.
With the right confluence of economic and geopolitical developments we should see gold break through $1500, then $2000, and possibly still higher round numbers in the next few years – particularly if we get the type of buying frenzy or mania that often occurs late in the price cycles of financial and commodity markets.
This is hardly an audacious forecast when looked at relative to the upward march in consumer prices over the past 28 years. After all, the previous high of $875 an ounce in January 1980, when adjusted for inflation since then, is today equivalent to more than $2200.
Let me end with a warning about the days and weeks ahead. In the short term, gold remains volatile and vulnerable, if only because market psychology is nervous, anxious, and fearful. In this environment, we could still get a quick sell-off that would bring us back to the recent lows. But, day by day, I think that becomes less likely and, day by day, I think the base is building for a lasting longer-term recovery.
You hear so many differnet points of view as to what will happen tomorrow that it is mind boggling. I believe that we will have an inflationary cycle. I was just informed that my Social Security benefit will increase by 5.8% for 2009. As long as I have been getting benefits, I have never had such an increase. And more importantly, the increases have always been less than the inflation rate, and I would have to believe that this still holds true. Hold onto your wallets.