There does not appear to be any stopping gold and silver right now. You already may know the metals logged a sensational second quarter, with gold jumping 13% and silver soaring 32%. As great as those performances were, the third quarter may prove even more robust. In July, gold jumped another 13% while silver rose a remarkable 34%. And thus far in August, the metals continue to flourish, with gold now well above the once-mythic $2000-per-ounce level.
As exciting as this historic surge has been, it already is prompting some concern among current metals owners and prospective metals owners alike. Namely, has the ship already sailed on gold and silver?
It’s a reasonable concern for prudent retirement savers to have. After all, given the power and speed demonstrated by gold and silver recently, it makes sense to wonder if the metals are at or near their peak for this market.
In order to answer the question correctly, it’s essential to tune out the “noise” being made by the electrifying price action of gold and silver right now so you can hear what’s really driving the metals upward. When you do that, you’ll find that it’s the woeful economic circumstances and outlook of the pandemic that are the real sources of precious metals energy presently. And because there appears to be no end in sight to the public health crisis, there’s also no end in sight to the economic conditions that are creating such a fertile environment for gold and silver.
CBO: Pandemic’s Effects to Last Through 2030
Economists are not health experts, but this they know: Until there’s a meaningful resolution to the COVID-19 outbreak, the economic consequences of the pandemic will remain with us.
It is for this reason that Minneapolis Federal Reserve Bank President Neel Kashkari has come out in favor of another widespread lockdown. He’s well aware of how unpopular such a measure is, particularly in the U.S. However, Kashkari is convinced it’s a much better option than trying to push through the pandemic using uncoordinated, disconnected measures applied at regional and local levels.
During a recent appearance on CBS’s “Face the Nation,”Kashkari told John Dickerson that lockdowns are “the only way we’re really going to have a real robust economic recovery.” Kashkari added that without widespread lockdowns, “we’re going to have flareups, [intermittent and ongoing] lockdowns and a very halting recovery with many more job losses and many more bankruptcies for an extended period of time, unfortunately.”
One problem with Kashkari’s proposed solution is that widespread lockdowns result in significant and lasting damage to the economy, even as they might be the best “cure” for both rising infection rates and related economic impact over the long haul. The second quarter saw a worst-ever 32.9% drop in U.S. gross domestic product (GDP) thanks to nationwide lockdownsearlier this year. Moreover, the Congressional Budget Office (CBO) recently determined that the nation is likely to suffer from the economic effects of the pandemic until 2030. And as each day passes with no firm resolution to the outbreak, the chances increase that the country will experience economic fallout well beyond the end of the current decade.
Exacerbating this dire economic outlook is the reality that the pandemic is getting worse by the day. Indeed, the infection rate seems to be growing as fast as gold and silver are rising. The month of July saw the number of confirmed cases of COVID-19 worldwide grow from 10.4 million to 17.6 million. Presently, the U.S. has far and away the highest number of cases – just under 5 million. The virus has claimed 723,000 million lives worldwide, and the U.S. has the dubious distinction of leading that category, as well, with 162,000 virus-related deaths.
So what does this mean for current precious metals owners as well as those wondering if it’s still a good time to buy? It means we can expect to continue seeing generous helpings of Federal Reserve quantitative easing and federal deficit spending – precisely the kinds of dollar-debasing efforts from the top that are designed to “save” the economy but which also add enormous amounts of fertilizer to the gold and silver crops.
Analyst: Pandemic-Triggered Fed QE Will Lead to $10,000 Gold
So if, in fact, the precious metals market is going to continue to surge, where can we expect gold prices to go from here?
Although expert price forecasts vary widely, none are indicative of a bull that’s expected to suddenly keel over anytime soon. Recently, Barry Dawes, executive chairman at Martin Place Securities, projected that gold would reach $3,500 per ounce in the next 24 months. If it happens, it means gold will have climbed another 70% in the next two years.
$3,500-per-ounce is impressive, to be sure. But there are other learned observers who are expecting even bigger things from gold this time around. One of those is Dan Oliver, founder of Myrmikan Capital. Oliver believes we’ll see $10,000-per-ounce gold on the strength of ongoing and massive pandemic-fueled asset purchases by the Federal Reserve. Oliver referenced his price projection during a recent interview excerpted at Energy & Capital:
The Fed, as you know, has been on a massive purchasing spree because of the virus situation, and so, therefore, the equilibrium price of gold is going up commensurately, and so the numbers now to balance that balance sheet are enormously high. My [forecast for gold prices] has changed. I’m at $10,000 now.
Dawes and Oliver clearly are not among those worried that the precious metals surge may be on the verge of ending. Neither are a host of others who don’t see the rise of gold and silver strictly in terms of price action, but instead see it as the natural result of a fundamental change in the long-term economic landscape. And as long as the nation’s – and the world’s – economic circumstances demand both ongoing central bank asset purchases at unprecedented levels and record amounts of deficit spending, there’s little reason to think gold and silver will cease their epic rise anytime soon.