We have been watching gold closely and seen it continue to rally in 2016. One of Wall Street’s most closely observed commodities watchers says we could be at the start of a historical rally for the precious metal.
However, the spur for gold’s gains could stem from a nerve-wracking sequence of events.
Jim Rickards who has put pen to numerous New York Times best sellers on the relationship between commodities and currencies. Said last week that, “We have imploded twice in the last 16 years so get ready for the third one.” His most recent book “The New Case for Gold,” safeguards the rationale that gold always has been, and always will be, a true safe haven during volatile times. He therefore urges investors to think of the commodity as insurance, not an investment.
Rickards cited the financial meltdown of 2008; where U.S. banks teetered on the brink of melt down before the government’s multi-billion dollar bailout. Rickards predicts the consistency of a financial panic every 10 years saying investors should brace for another disaster in 2018. However, this time around, Rickards believes that it’s the U.S. government itself that may trigger the next crisis.
Rickards asks, “In 2018, who’s going to bail out the Central Banks?” “The bailout money is going to come from the IMF [International Monetary Fund] as they have the only clean balance sheet left.”
This occurrence, Rickards believes, will drive gold higher—to $10,000, to be exact. That eye-popping sum “is not a made up number,” Rickards insisted. “It is the implied non-deflationary price,” he reasoned.
He goes on to say “Global M1 has about 40 percent gold backing. There’s about 35,000 tons of official gold on the world. That comes out to about $10,000 an ounce to use gold to create confidence in the dollar,” explained Rickards. “The dollar price of gold moves around, but gold itself stays constant.”
We must remember Rickards’ scenario, is a hypothetical value based on a number of theoretical occurrences that would need to happen in the global economy. We see the bullion remain on a three-week winning streak, but it’s a long way from the levels predicted by the analyst. On Friday, gold ended trading around $1,278 an ounce.