Some gold investors such as Jim Rickards foresee gold bullion reaching $10,000 an ounce in the coming years. Historically, gold has never been worth over $2,000 an ounce. How could it be possible for gold to reach a record breaking $10K and when can we expect it to happen?
The Inverse Relationship Between Gold and the Dollar
Rickards points to the inverse relationship between gold and the dollar when making predictions about the future price of gold. He predicts that the value of the U.S. dollar will continue to decline due to the Fed’s inability to raise interest rates in 2016. That prediction became more of a reality recently when the U.K. voted to leave the E.U. Other factors that will hold the dollar back in 2016 are the uncertainty surrounding an election year and political instability worldwide.
10-Year Trend Points to 2018
Rickards suggests that a financial panic will occur soon. He cites historical economic downturns, such as the financial crisis of 2008 and the failure of Long-Term Capital Management in 1998, to show that financial panic occurs every 10 years. With that in mind, Rickards points to 2018 as the year gold will reach $10,000.
In order for this to occur, the economy will have to take several negative turns, but for Rickards the geo-political instability makes it possible for the markets to fall while gold’s rallying continues.
Rickards explains that his $10,000 number is derived from the implied non-deflationary price. This means that if confidence is lost in fiat currencies worldwide, then $10,000 an ounce for gold is what it will take to reestablish the dollar without causing deflation.
Do you think gold could be worth $10,000 an ounce? Regardless of whether or not gold reaches these heights, gold bullion is still a solid investment. Still not convinced? Check out “Why Should I Buy Precious Metals Like Gold and Silver?” to learn more.