Where will the gold go?

Posted by Costas Stopas

Where will the gold go?

In 2000, the price of gold ended its multi-year decline at $ 256 an ounce, and the “head” of stock indices, the S&P 500, peaked at 1,600 points.

In 2000, if we measure the S&P 500 in dollars, it took 5.5 ounces of gold to buy the “S&P 500″…

In 2023, with gold over $2,000 an ounce and the S&P 500 index, even tentatively, around 4,000 units, it takes an ounce of gold against the “S&P 500.”

Despite the dizzying and “bloated” rise in stocks over the past 20 years, gold has come a long way. Its prospects, amid inflationary expectations, debt – which portend bankruptcy – and geopolitical reorganizations, remain particularly dynamic …

If we compare the returns of the Greek stock market and gold, between 2000 and 2023, the results are more difficult.

The rise of gold is linked to concerns about public and private debts around the world that have reached unpayable levels, the decline of Western economic and political dominance, demographic aging and the coming pension crisis, and above all the looming social and political unrest. .

The firm belief in the column since his signing as “Consultant” in “Imerisia”, 20-25 years ago, has been that the period after 2000 will be the period of the “yellow metal” revival …

This is because the way the dot.com crash of 2000 was handled predicted a successive “bubble” period that would culminate in the mother of all “bubbles” and a crisis that would cause global restructuring…

After 2000, keeping interest rates at extremely low levels for too long shortened the effects of the 2000 crash, but pointed to the causes of the housing bubble and crash of 2008.

Then zero interest rates and quantitative easing programs gave birth to a continuous “bubble” of everything, keeping stock and real estate prices at fantastically high levels.

The column’s core belief remains the view that the West is facing a crisis similar to the one Greece has gone through in the past decade. This crisis will have far more painful consequences than the one in Greece, which fell into “soft” thanks to the safety net provided by EU creditors and partners. and allies in the West.

The reference to the example of former US President Donald Trump on trial may, rightly or wrongly, be a spark for political turmoil in the United States, which is becoming more divided than ever…

Will US tensions soon reach a point of no return? According to the results of a YouGov poll republished by The Guardian, more than 40% of Americans believe that civil war is likely within the next decade. Even more than 50% among Republican voters.

In detail, 14% of respondents said they were “sure” that civil war would break out by 2033 in their country, while 29% of respondents said they were “most likely to be certain”. And 43% of Americans surveyed said such an event was “likely”.

be seen: The United States: The threat of civil war that Americans consider “possible”

The high interest rates with which central banks try to tame inflation is only a matter of time before they cause bankruptcies and recessions.

Once this is achieved, it is likely that central banks will return to their loose monetary policies more aggressively. This will happen because politicians and voters have become addicted to easy temporary solutions and postponing difficult decisions.

Inflation will rebound more strongly and this is particularly positive for gold and secondarily for a portion of stocks.

China, Russia, India and other rising powers are now directly challenging the dollar’s dominance as a medium of international trade and reserve currency. De-dollarization is another element that supports the increase in demand for gold…

There are already articles from official media and columnists supporting the need to implement some sort of gold standard.

“The gold standard is a strictly forbidden topic for discussion among economists and financial policy makers. But the time has come to break this taboo. A monetary system based on gold would have prevented our current problems, as well as past financial and banking crises of the last century.

… The lesson that history offers us is clear, even if those who know do not want to accept it: the state works best when it is governed by the gold standard. This and lower tax rates are essential factors for lasting prosperity. always.

So let’s break the golden taboo and let the dialogue begin…”

Gold: forbidden treatment..

Until recently, these views were only expressed by some charismatic liberal critical scholars…

Liberal economists express more radical views than those of neoliberals who accept the central bank’s regulatory role in monetary, and therefore economic, policy.

Many believe that the impending crisis in the West will be the reason that rising powers such as China will undermine it.

Rival authoritarian powers are likely to be hit even worse by the Western crisis. Authoritarian regimes with centrally planned economies usually collapse first and then collapse due to their inertia.

If at some point the dollar and the euro lose their value due to rampant monetary policies, there will be proposals to return to some kind of “gold standard”. If this happens, because the West has the largest reserves, the forces that challenge the dollar and the euro will be hit hard…

In the West, if we let market forces act, a creative destruction renaissance could emerge. Therefore, open society and democracy must be protected.

Even if this means that we will have to leave to judgment the various extremes which the crisis will bring forth, they will be refuted and ridiculed, as happened in Greece in the last decade…

The impending turmoil favors a higher price for gold, which has been a safe haven in times of crisis for the past 5,000 years…

A few months ago, Bank of America analysts predicted that gold would reach $3,000 an ounce.

I suspect that these forecasts may be conservative for the next five years.

See: Gold: Likely to Rise to $3,000 in 2023?

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