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2024
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Steve Forbes Believes the Gold Standard Is Coming Back
This week, Your News to Know rounds up the latest top stories involving precious metals and the overall economy. Stories include: Steve Forbes believes a return to the gold standard is coming, one respected analyst forecasts $4,821 gold by 2030, and analysts are now eyeing $50 silver as an inevitability. Steve Forbes predicts an imminent return to the gold standard In an analysis that will satisfy every sound money enthusiast, Steve Forbes opens with the title: The Signs Are There: The Gold Standard Is Coming Back. Forbes is noticing many of the points we have been raising for months and years, as one would expect from the owner of a large financial publication. He opens with an interesting bit:
Is it that hard to believe, though? We have heard time and again that the world always returns to gold. The very same economists and financial officials that hold gold in contempt, probably while hoarding it privately, are modern monetary theory (MMT) hype-men. Any kind of return to gold represents a concession, if not a total failure of the current monetary system. It says: we tried free-floating money, and it didn't work, but we promised it will, and now most people are worse off because of it. Forbes details as much, listing some obvious points that are practically being buried by the mainstream:
Forbes doesn't go too deep into how damaging inflation has been for everyone besides the ultra-wealthy and the official sector, but instead focuses on the signs that a gold standard is looming. They are mostly points we have covered in detail, such as: Central banks have been preparing by buying tons of gold on a monthly basis. The rise in cryptocurrencies shows a loss of faith in government-issued currency; people would rather trust private currencies. (He's also pretty optimistic on the idea of gold-tethered cryptos, which might become a necessity if MMT continues and the official sector continues to reassure us inflation is a temporary and minor issue.) Inflation. Forbes also gives a plug to his book titled Inflation: What It Is, Why It's Bad, and How to Fix It, but we don't mind. The sad reality is that inflation is one of the most tyrannical thorns in the side of the modern man, or woman. Central banks still claim that inflation, when kept in check, stimulates progress and growth. (Nobody believes them, but that’s their story and they’re sticking to it.) Waking people up to just how big of a problem inflation is, and explaining to them that there is no upside to it for the average person, is a very important step on the road to monetary normalcy. Forbes also touches upon BRICS and Zimbabwe. We recently noted that gold might be blamed if Zimbabwe's currency project fails, and Forbes reiterates this. Similarly, he says that BRICS so far has been mostly implications and guesses. And, as we have previously pointed out, BRICS countries have a very bad record when it comes to money management. So a pinch of skepticism is warranted, but Forbes doesn't believe this detracts from gold in any way. Whether the BRICS R5or the Zimbabwe gold currency fail or not, these efforts are finally admitting that gold needs to be the center piece of a monetary system in order to work. Given how long we've been on free-floating money, it's going to take a while to reintroduce gold to the new world order, especially when most central banks refuse to acknowledge the notion. But we seem to be getting there, and when we do, the wait will be worth it even if you don't own gold. (Though ideally, you'd have a fair bit of it by then… Because, if you wait, you’ll find yourself buying in a seller’s market.)
If one bothers to go over Ronald Stoeferle's gold forecasts over the past decade, they'll find them to be quite accurate. And before we delve into his latest long-term forecast for gold, we'd also like to remind readers that Stoeferle was recently being rather moderate about gold. Stoeferle is the lead analyst of the respected publication In Gold We Trust, the most comprehensive and detailed gold market study available on the market. He said that the metal doesn't need to run past $2,200 in the near-term, and that even that might be a little high. Even below it, it has accomplished its role and rewarded investors plenty, he said. The takeaway from this is that Stoeferle is far from a jittery gold bug issuing looping forecasts, although these have actually been materializing as of late... In his latest issuance of the lengthy In Gold We Trust report, Stoeferle called for $4,821 gold by 2030. Six years can go by pretty fast, and again, Stoeferle is mostly moderate in his forecasts. So any time we have a bombastic price target by a tempered analyst, we should pay attention. Stoeferle uses some pretty hard technicals and data to arrive to this figure. What are the perfect circumstances necessary for gold to reach $4,800 in six years? Actually, it only has to do what it has been doing this entire time. As he notes, a 12% annual return is the only thing needed to achieve that target. The return in the 2000s was over 14%, so we appear to be on track to that target based on historical record alone. And in the case of gold, the historical record is as good of a future pointer as anything.
In other words, Stoeferle is telling us that the same asset that has been posting all-time-highs one after another is being held down by a few factors that are soon looking to dissipate. Interestingly, he believes that rate cuts are indeed coming. The debate over whether the Federal Reserve will cut, hike or keep has heated up in recent weeks. Having just covered multiple high-profile opinions that the Fed will soon hike again, we now have Max Layton, Global Head of Citigroup Commodities Research, saying there will be five cuts this year alone. Nobody can seem to agree on where the benchmark rate is going, but most seem to agree that gold is going up over the next year and half. That tells us that gold's drivers are so strong it can practically ignore the interest rate drama, which used to very rigidly dictate gold's price. As for the near-term, it's a pick 'em in terms of bullish forecasts. UBS has recently upped its year-end forecast to $2,600, urging investors to buy any dip below $2,300. It feels like we haven't seen one of those in a while… As for Citi, they're sticking to their target of $3,000 gold within 12 months, though a massive bout of monetary loosening could possibly push gold even higher. TD Securities: After $30, $50 silver is indeed the next target It was a bold thing for us to say that $50 is the next level to watch for silver after $30, but we went there. Now, some notable experts are saying the same, along with outlining some fundamentals that are screaming silver! Daniel Ghali, TD Securities' senior commodity strategist, had this to say about the matter:
We didn't just make that number up, but while Ghali is very bullish on silver, we'll still introduce a few caveats. Silver is unpredictable, volatile, arguably manipulated, and had been rather disappointing recently. If silver could stay $28 when gold was $2,300, who's to say it wouldn’t drop to $20 when gold is $2,600? (No, this makes no sense!) But all of this is inconsequential because silver essentially has to go up. The gold/silver ratio tells us as much, as do many other things. Silver has never stayed this undervalued compared to gold, and any time it has approached these levels, the correction to the upside was massive. Historical precedent doesn’t lie – but it’s not a guarantee. “Past performance does not equate to future results,” as financial advisors love to say… Still, the pent-up price explosion seems inevitable. We think it's little more than a waiting game. Speaking of history, all those times silver corrected explosively weren't accompanied by the kind of fundamentals we have now. The Silver Institute said last month that we're on track for a supply deficit of 215.3 million ounces this year, the second-largest in more than 20 years. But Ghali adds an interesting twist to the idea, suggesting that renewed investor interest could balloon the deficit even further, as any kind of mass interest in silver places a massive strain on the LBMA. London’s physical silver supply has already declined 5% this year and hasn’t recovered from the astonishing 30% decline during the 2021 silver squeeze. Financial derivatives are infamous for price manipulation, and silver’s derivatives almost beggar belief. In 2016, there were 517 claims of ownership for every single ounce of silver bullion! This is one the reasons we say, “If you can’t see it, you don’t own it.” That 517-1 ratio is actually a conservative figure, because a more comprehensive survey of traders would undoubtedly produce an even larger figure. So what happens when people try to turn their futures contracts into a request for physical delivery? Both this and Ghali's comments reinforce the idea we went over earlier this month, which is that industry might end up competing with investors for silver. As we mentioned, it's no big deal for an auto manufacturer to bid up silver's price to double (even if it means luring investors into profit-taking). This creates an even greater deficit, however, as the silver in question goes from liquid and fungible bullion into a vehicle that may or may not get recycled. We're thrilled by gold's fundamentals, but so long as the solar and EV industries hold up, the fundamentals of silver are even more promising.
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