Photo: Bullion Vault / Flickr
Be prepared to hear more calls like this.”It has never been easy to have a rational conversation about the value of gold,” wrote Ken Rogoff in a 2010 piece titled $10,000 Gold?.
But with the national debt passing $16 trillion and the Federal Reserve launching a unlimited quantitative easing, the gold bulls will increasingly tell you that the sum of their fears are coming true.
In this week’s issue of Barron’s, Jim McTague spoke to Guggenheim Partners Scott Minerd:
Hedging against the most pessimistic case without crippling the upside potential of a better or even miraculous case appears to be as unsolvable as the proverbial Gordian knot. Alexander the Great “solved” the intellectually challenging knot riddle by severing it with his sword. Scott Minerd, chief investment officer of Guggenheim Partners, offers a more reasoned but equally simple solution to the hedging conundrum: gold. In extreme circumstances—like miscalculations regarding inflation by the Federal Reserve—the metal could hit $10,000 per troy ounce, he asserts. Thursday, after the Fed disclosed its latest financial-stimulus scheme, the metal rose about 2% to $1,768.
The ultra bullish forecasts for gold aren’t without precedent. Applying the “Pareto principle” – the idea is that 80 per cent of the effects of something come from just 20 per cent of the causes – Erste Group analyst Ronald-Peter Stoeferle argued that we could see $8,300 gold by the spring of 2015.
Citi’s Tom Fitzpatrick also has an extremely bullish gold scenario out there. “We see no reason why this gold trend cannot perform as well as the last bull market in gold between 1970 and 1980,” he told King World News. “If you replicated that move exactly, it will take gold to $6,300.”
Inflation and technical pattern aren’t the only ways to get to extremely high values for gold. Richard Russell and QB Asset Management’s Lee Quaintance and Paul Brodsky have proposed pegging the dollar to gold at $10,000 per ounce.
Bottom line: expect more gold bulls to present their ultra bullish cases for gold.
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