Gold 2020: The Long-Term View

ALL PAPER MONEY throughout history has proved defective when compared to Gold Bullion in terms of one of the classic functions of money.

The supply position of gold is favorable to further rises in the Gold Price. Despite the rise in the price that has taken place already, there is no sign on the production side of the creation of excess supply, though of course, stocks are high relative to industrial and jewelry outtake. Because it acts as a reserve currency, gold stocks are always large.

There is also a link between the price of oil and the price of gold. In the 1970s, during which the OPEC oil cartel raised the price of its oil exports dramatically, gold rose with oil and also along with the general increase in world inflation. For some years I have been forecasting an oil price of $100 a barrel – which has now been reached, if ever so briefly – and a Gold Price of $1,000 an ounce. It would only take another 10% for the second target to be reached.

The oil price has traditionally been volatile. A short-term surplus could see a short-term fall in the oil price just as a war with Iran could force the price up to $150 or even $200 a barrel. However, the long term problem of oil supply, and the insatiable growth of Asian demand, suggests that the long term price of oil will continue to rise.

The same, in my view, is likely to be true of the price of gold. The great democracies of the West will find it difficult to make the sacrifices necessary to deal with the growing shortage of fundamental resources – most notably energy, including oil, gas and uranium. Our excessive levels of debt are likely at some point to lead to inflation in the cost of living, and that will wipe out the real value of debt.

In these conditions, the underlying economic pressures are for a still higher Gold Price. In the last decade, the price of gold has been doubling every five or six years. My own guess would be that gold will hit $2,000 an ounce in the early 2020s, but some analysts think that will happen much earlier.