There is a weird situation that only happens at the precipice of a major financial crisis.
I’ve lived through several of them now and as an old guy, let’s just say this one has me concerned. But when I see the headline posted today first by Mining.com then others, it’s time to start worrying:
Goldman Sachs upgrades gold forecast again to $3,700
Why is this blogger/radio host concerned?
Over a year ago I warned that a price increase to over $3000 would be indicative of a major geopolitical or economic stress. Congratulations world, we have both and a lot of it is a self-inflicted wound by America’s inept leadership from both parties.
In fact my forecast on these pages for gold in 2025 was as follows:
Last but not least, let’s see if I can top last year’s gold forecast with another home run. 2025 will be known as a transition year, a year of massive instability hence gold should finish somewhere between $3500-$3600 per ounce with a massive rally paralleling the rise in interest rates. Silver finally starts to roll finishing the year around $48 per ounce with a $20 range up and down from that target.
If Goldman Sachs is so concerned about the US and global economy to project gold prices higher than this author, folks you should start building your bomb shelter now.
Let’s look at the charts and what the article actually said.
The following excerpt from the Mining.com story speaks volumes as to why yours truly has been sounding the alarm bell:
Former Federal Reserve economist Dr. James Rickards notes: “We’re witnessing a perfect storm for gold—monetary expansion, fiscal deficits, geopolitical instability, and a loss of confidence in traditional currencies. The $3,700 target may prove conservative if these trends accelerate.”
I concur with his opinion.
There is a risk that further mistakes could be made which will result in gold far surpassing my forecast, Goldman’s forecast, and worse anything rational during normal economic times. The chart below bears out this concern when the United States faced its last risk of financial collapse in 2008.
Take note of the leg up from 2006 to 2008 as bank failures accelerated as well as mortgage entities, gold detected the problems underneath the surface. AS the markets began to crash and burn in 2008, especially after Bear Stearns, gold was sold to raise cash and as the chart reflects in the August through November period of 2008 people sold gold in panic to cover margin calls and pray the powers that be would figure this mess out.
It would take until September of 2012 for financial markets and some degree of calm in the credit system before investors would get off the gold hedging cycle and by then new all time highs had been established.
Let’s fast forward to the current era, after the December 2018 financial scare and please ignore the pandemic of 2020 as the charts then were only a precursor to what was, and now is, impacting US and global financial markets.
The common historical reprise is, pardon me if I err, “mistakes were made” yet we’re not quite there yet.
The trade war has begun. The credit and currency wars will follow. Yet the American public which purchased gold all the way up were mocked as “doomers” and people in love with a pet yellow rock.
Apparently Goldman Sachs is no longer mocking or laughing and neither is Morgan Stanley or Citigroup. If this period of instability lasts longer than June of this year, odds are gold might increase well past $4100 or higher this year. This author did not predict that only because I was under the mistaken impression that the grown ups were going to act that way during this period of economic duress.
The reason I limited my top to $3500-$3600 was easy. Although I can not quote the exact historical 1942 Russian phrase from World War II where a tank commander wisely said (rough translation):
“Never throw a Molotov Cocktail inside of your own tank.”
Perhaps Harold Lutnick and Peter Navarro should go for a ride in a tank some day.
