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<\/p>\nEditor’s Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what asset will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It’s a showdown of global proportions, so don’t miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.<\/p>\n
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(Kitco News) – Central bankers are likely to keep printing money, and mine supply of gold will decline after reduced exploration, analysts and fund managers said.<\/p>\n
As a result, they expect gold prices to soar in the decade ahead.<\/p>\n
Kitco News interviewed three market veterans for their long-term view on gold: Frank Holmes, chief executive and chief investment officer with U.S. Global Investors; Rohit Savant, director of research with CPM Group; and David Morgan, independent analyst and publisher of the Morgan Report. All look for new record highs, while two see gold hitting $5,000 an ounce in the decade ahead.<\/p>\n
Following is a synopsis of the interviews.<\/p>\n
Holmes: \u2018gold is probably going to $5,000\u2019<\/strong><\/p>\n Holmes suggested \u201cunprecedented money printing\u201d will continue. This refers to ultra-loose monetary policy undertaken by central banks to flood the economy with money.<\/p>\n Fiscal stimulus is harder to implement since it has to work its way through different layers and branches of government.<\/p>\n \u201cIt\u2019s much easier for central banks to print money,\u201d said the CEO of U.S. Global Investors. \u201cAnd as long as that takes place with no checks and controls, then it could go to $10,000.\u201d<\/p>\n Homes characterized the G20 industrialized nations as an OPEC-like \u201ccartel\u201d printing money. This is especially the case with fewer major currencies since the advent of the euro, replacing most of the individual European currencies.<\/p>\n Against this backdrop, \u201call of a sudden it\u2019s much easier to print money excessively,\u201d Holmes said. Besides low short-term interest rates, there also have been several rounds of quantitative easing, in which central banks buy bonds to push down long-term interest rates.<\/p>\n \u201cIt\u2019s an incredible backdrop for gold, because it\u2019s much easier to print a $1 trillion repo in U.S. dollars than it is ever going to be to produce $1 trillion in gold bullion,\u201d he said. \u201cIt takes a long time to produce gold\u2026.So it\u2019s going to retain that value.\u201d<\/p>\n Holmes compared central banks\u2019 constant money printing to the \u201cdopamine rush\u201d that leads to alcoholism.<\/p>\n \u201cFirst one beer gave them that feeling, then it took five beers, then 10 beers\u2026.That metaphor is the same for drinking as for printing the money to try to stimulate economic growth.\u201d<\/p>\n Meanwhile, the mine supply of gold is likely to decline over the next decade, Holmes said. There has been limited new technology to find new supply, as well as limited spending by companies on exploration. Further, he cited \u201ctremendous\u201d environmental costs of opening new mines, as well as \u201cgreat risks\u201d when mining far underground.<\/p>\n \u201cAll of this bodes for tighter supply,\u201d Holmes said.<\/p>\n He used palladium as an example of how much a commodity can soar when supplies are tight. This metal is roughly some 53% for the year to date as demand for auto catalysts remains strong but supply did not follow suit.<\/p>\n \u201cPalladium has been on a tear,\u201d Holmes said. \u201cWhy? Supply peaked a long time ago.\u201d<\/p>\n Savant: gold to hit record-high annual average<\/strong><\/p>\n CPM Group looks for gold to fare well in the decade ahead as mine output falls but central-bank and investor demand remain strong, said Savant, director of research with the consultancy.<\/p>\n \u201cWe think that gold prices will probably reach new record highs on an annual average basis over the next 10 years,\u201d Savant said.<\/p>\n In fact, he said, at some point, the annual average could exceed $2,000, which would put it above the old record daily high near $1,921.<\/p>\n \u201cWe think mine supply will hover around record high levels over the next two or three years,\u201d said Savant. \u201cBeyond that, we are forecasting a decline in mine supply over the next 10-year period.\u201d<\/p>\n The main influence will be the lack of capital expenditures on exploration and development after the sharp decline in gold prices back around 2012, Savant said. This means fewer new projects and mines.<\/p>\n Meanwhile, central banks have been noted buyers in recent years. And Savant looks for them to remain net buyers. Central banks added 656 metric tons to gold holdings in 2018, the most since 1967, and World Gold Council data shows they had already accumulated 562 tons through the first 10 months of 2019.<\/p>\n \u201cWe think they will continue to buy gold as a way to diversify away from the [U.S.] dollar,\u201d Savant said.<\/p>\n This helps put a floor under gold prices, he explained.<\/p>\n \u201cWe think investors too will remain net buyers of gold over the next decade,\u201d Savant said. \u201cThey have a lot of reasons to remain interested in gold. You have this low interest-rate environment, which we don\u2019t think is going away. There is a lot of political uncertainty pretty much everywhere. Again, that is not something that is going to go away.\u201d<\/p>\n Meanwhile, Savant added, even though trade tensions have calmed some in recent weeks, the trend is likely to continue of countries wanting to move away from globalization, thereby boosting gold prices.<\/p>\n \u201cAlso, you would expect to see investors using gold as a diversifier, especially where asset prices are at this point. It makes some sense to have some of your portfolio hedged [with gold].\u201d<\/p>\n Morgan: Debt burden \u2018will have to be addressed\u2019<\/strong><\/p>\n Morgan, the independent analyst who publishes the Morgan Report, listed three main factors that he expects to propel gold much higher: the economy, stock market and U.S. dollar. The analyst figures gold could hit $5,000 an ounce in the decade ahead, especially as the greenback loses purchasing power.<\/p>\n \u201cThe economy is not doing as well as the mainstream financial press tells us,\u201d Morgan said. He later added, \u201cI think we\u2019re going to see a continuation of that trend for the first few years in the new decade.\u201d<\/p>\n As a result, he anticipates some kind of \u201creset\u201d in currency valuations in the future, as well as possible debt forgiveness or restructuring. He cited an explosion in government debt, as well as dramatic increases in debt taken on by consumers and students, with most Americans overextended with personal debt.<\/p>\n \u201cThis debt burden that has engulfed the world either officially or unofficially,\u201d Morgan said.<\/p>\n This would be addressed \u201cunofficially\u201d if political leaders \u201clet things go without taking appropriate actions, which means the dollar will continue to lose purchasing power.\u201d This would be a case of the market taking care of the problems itself, with so much confidence lost in the dollar that people begin spending heavily on hard goods before their currency loses its purchasing power, Morgan explained. This was the case in the late 1970s and 1980s.<\/p>\n \u201cThat\u2019s the big problem. Once it takes hold in the public\u2019s consciousness, there is no bank in the world that can stop it,\u201d Morgan said.<\/p>\n Morgan also cited central-bank gold buying, with some nations are already exiting the dollar, selling Treasuries and moving into gold instead. \u201cI believe that trend will continue.\u201d<\/p>\n Meanwhile, the analyst characterized the stock market as \u201covervalued\u201d by \u201calmost every measure.\u201d Gold tends to benefit when stocks tumble.<\/p>\n \u201cI think the stock market could have a good year probably through the election and maybe a bit past it,\u201d Morgan said. \u201cBut early in this next decade, I expect to see an adjustment in the stock market, which could happen as a result of the \u2018reset\u2019 or could be one of the causes to force the \u2018reset.\u2019\u201d<\/p>\n Morgan pointed out that the Federal Reserve has been pumping money into the economy through repo operations, which suggests there are liquidity issues in the banking system. Banks \u201care not trusting each other again,\u201d as happened back in 2008 ahead of the Great Recession, he explained.<\/p>\n \u201cIf the banks don\u2019t trust each other, that freezes the system,\u201d Morgan said. He later added, \u201cIt\u2019s quite scary, actually.\u201d<\/p>\n By Allen Sykora
\nFor Kitco News<\/p>\n","protected":false},"excerpt":{"rendered":"