“Joy” is going to drive gold prices to absurd levels

Taylor Swift’s announcement pretty much said it all.

After last night’s Presidential debate, the pop star publicly endorsed Kamala Harris because “she is a steady-handed, gifted leader” who fights for “LGBTQ+ rights, IVF, and a woman’s right to her own body. . .”

I really try to keep an open mind and understand other people’s opinions. But I personally have an extremely difficult time comprehending how someone thinks abortion and LGBTQ rights are the most important problems facing the country right now.

This is a pivotal moment in history. The United States is in serious decline. Among other critical challenges, the national debt is $35 trillion and is set to grow by at least $22 trillion over the next decade (according to the government’s own forecasts).

The impact of this extreme debt level cannot be overstated. The US dollar will almost certainly lose its reserve status, inflation will soar, and the government will most likely default on key promises like Social Security.

On top of that is the invasion at the southern border, the threat of war, the decline in US military readiness, full-blown government dysfunction, and America’s waning power in the world.

But none of these issues makes it onto Swift’s list of priorities. And given the eight million “likes” within the first few hours of her making that post, she’s obviously far from alone.

Yes, I recognize that abortion and LGBTQ rights are concerns for some people. But the geopolitical and economic security of the world’s dominant superpower is something that affects literally every single person alive.

Kamala has positioned herself as the “joy” candidate. And sure, she’s all about abortion and LGBTQ. But from an economic and security perspective, she’s a total disaster.

She wants to give $25,000 to every first-time home buyer (without even a basic understanding that this will only serve to make starter homes more expensive by… duh… $25,000!)

She blames inflation on “greed” and insists that she’ll bring down prices by fighting grocery stores in court. She’s also floated price controls as a way to bring down inflation.

Kamala sees bigger government as the way to solve problems (even though this typically just makes things worse) and will almost certainly oversee soaring deficits that America simply cannot afford.

Again, the Congressional Budget office already forecasts a total of $22 trillion in deficit spending over the next decade– and most of that within the next 5-7 years, i.e. a theoretical Kamala administration.

And most likely her ideas will make that number much, much worse… which is what brings me to gold.

I want to clarify first that I’m not a “gold-bug”. I don’t have a fanatical view that gold is a magical solution to all the world’s problems.

But it’s obvious to me that there is tremendous upside for gold, even though it’s already at an all-time high. Here’s why:

As recently as 2020, the gold price dipped below $1,500 per ounce. Today it is trading at $2,500 per ounce.

That’s a 66% surge in price which has been driven largely by central bank purchase. In fact, most retail investors have been SELLING gold, if you look at gold ETF outflows. So, while individuals were selling, central banks were buying… sending gold prices to record highs.

In a typical year, central banks around the world buy an average of roughly 500 metric tons of gold annually.

But from 2022 through mid-2024, that figure doubled, with central banks purchasing an average of 1,000 tons per year.

In other words, central banks have purchased an additional 500 tons per year over the past 2 ½ years… for a total of 1,250 metric tons of ‘excess’ central bank gold demand since early 2022.

The value of these 1,250 metric tons of gold over the past few years amounts to about $80 billion.

So, think about it– central banks around the world, from Poland to China to Mongolia to India to Singapore– used some of their foreign reserve stockpiles of US dollars to buy gold.

This means that $80 billion worth of foreign reserves that was taken out of US dollars and invested in gold caused the gold price to surge from $1500 to $2500.

Guess how many US dollars in total are sitting on central bank balance sheets around the world in total?

More than $8 TRILLION.

So, $80 billion was enough to make gold rise from $1500 to $2500… yet central banks still have more than 100x as much US dollar reserves on their balance sheets.

What will happen to the gold price if the foreign central banks invest even 5% of their reserves into gold?

My guess is that the gold price will go a LOT higher. And on top of that, hedge funds and individual investors will probably jump on the bandwagon too. ETF holdings will go through the roof, and the gold price will go even higher.

The reasoning is pretty simple; as foreign nations continue to lose confidence in the US government, will they continue to hold so much of their reserves in US dollars? Probably not. And again, we’re already seeing early signs of the decline in foreign holdings of dollars.

My guess is that Kamala will push that trend into light speed.

So even though gold is already at an all-time high, I think a Kamala victory means MUCH higher prices over the next few years.

Source

Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.

From Simon Black of SovereignMan.com

Source: https://www.schiffsovereign.com/trends/joy-is-going-to-drive-gold-prices-to-absurd-levels-151408/