from Birch Gold Group:
This week, we ask: Who’s right about gold? While analysts shout gold is “overbought,” central banks are gearing up to buy millions more ounces (even near record high prices). Maybe there’s something we can learn from both perspectives?
Your News to Know rounds up the most important stories about precious metals and the overall economy. This week, we’ll cover:
- Analyst calls gold overbought…
- …while central banks prepare to buy millions more ounces – whose view do you believe?
- Silver zooms past $40 like it’s nothing (remind you of anything?)
TRUTH LIVES on at https://sgtreport.tv/
- Sound Money League goes to war with Florida’s attempt to control gold
Central banks want millions more ounces of gold (even at $3,800 each)
This call for a $6,000 gold price, coming from Steve Hanke (Professor of Applied Economics at Johns Hopkins University) on a recent episode of The David Lin Report, isn’t the same as the $6,600 price prediction I quoted last week. It’s an interesting interview and well worth a watch!
So check it out, or scroll down for my interpretation.
Gold is an extremely polarizing asset. Let me briefly explain why.
First, the majority of financial assets are “procyclical” or “risk-on” assets. This means that they perform best when the economy is booming.
Secondly, only a handful of financial assets are “countercyclical” or “risk-off” assets that tend to outperform when the economy stagnates or declines.
Ideally, diversification involves owning a mix of assets from both classes. That’s best for you, the investor because it means your savings aren’t dependent on a single phase of the economic cycle. But you know who it’s not best for? The financial services industry. They favor higher risk, procyclical assets and “busy” strategies that are much more profitable (for them). Basic diversification is simple – but that doesn’t mean it’s easy. The financial services industry is huge, with massive advertising budgets and highly-motivated sales teams.
Once you understand this, you can also understand why the mainstream financial news channels (and websites and magazines) always say the economy is booming!
And why anyone who expresses pessimism gets shouted down.
That’s why, as a financial asset, gold is so polarizing.
Now this also means, you’ll always be able to find any number of bearish forecasts on gold’s price. (You can also find outrageous predictions, though, granted, you have to look a little harder.)
Key takeaways from the interview:
Gold’s secular bull market has more room: Hanke expects the current cycle to peak around $6,000/oz – not in 2025, probably by the end of 2026. Notably, his estimate isn’t based on crisis scenarios. It’s tied to historical relationships with growth of per-capita disposable income.
Money supply > rate tweaks: The Fed funds rate is a sideshow. Instead, money supply growth drives economic outcomes.
