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Apr 20, 2022
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Gold will cost $2,500 this fall

Gold will cost $2,500 this fall

Photo: DPA/TASS

Gold prices may soon set another record, quotes again come close to the psychologically significant level of $2,000 per ounce. Moreover, the forecasts already feature a price of $2,100 and above. In the context of growing instability in the global financial market, professionals make the only right decision. The result of this trend may be the return of international settlements to the gold standard. There is no faith in other “universal equivalents”.

$2,052.6 — the price of an ounce of gold rose to this level in mid-March 2022. But this record, apparently, will soon be broken. After a rebound to the level of $1920, the precious metal began to rise in price again, at the time of writing this material, the price was only slightly below $2000.

“The possibility of a European Union embargo on Russian gas and the risk of restrictions on crude oil imports in Europe’s sixth round of sanctions have bolstered commodity prices. This fuels the demand for gold as a hedge against accelerating inflation, ”this is the version of what is happening from Bloomberg analysts.

Generally correct, but, as always, there are nuances. It’s not just about rising inflation in the eurozone. This, of course, is bad, but by no means critical. The gas embargo and its consequences are critical, which cannot be called otherwise than the collapse of the EU economy.

“Today, it is impossible to refuse purchases of Russian gas. German society is not yet ready for this. An immediate gas embargo will jeopardize the social order in Germany,” said the Vice Chancellor of Germany Robert Habek.

Simply put, there will be a riot. Stopped factories, cold houses, lack of electricity and water somehow do not contribute to the increased soulfulness of any individual. It doesn’t matter if it’s German, Dutch or French. The reflex will be one – to go and beat. Who is clear. Their politicians.

Politicians understand this and do not want to be beaten. But after all, they can be crushed, overseas “big brothers”. Apparently, financiers regard this probability as non-zero, that is, the EU may still be left without Russian gas. As a result, the single euro currency will inevitably collapse. In such a scenario, it is not even likely, but simply inevitable.

Accordingly, the multi-currency Old World will reappear, in which at first there will be a complete leapfrog with cross-rates. For example, the Greek drachma will quickly depreciate to near-zero values, in Italy there will also be their traditional hyperinflation with millions of lira for a slice of pizza.

The issue of the huge public debts of the member countries is also interesting. Germany and France, with the collapse of the EU, can still recognize these obligations and pay them off. Although it is not certain that this will happen. They can say that they took it away from themselves, almost from the heart, and everything was ruined by lazy Greeks, Spaniards with an eternal siesta, crazy psheks, proud ballus and other Chukhon kaasppadda. And they will be right! Public opinion in Germany and the Fifth Republic will support this. This is in the sense of a default. Or, as they call it, more graceful. The French will come up with, here they are masters.

Meanwhile, government bonds denominated in the single currency for a whopping $11 trillion. euros are on the balance sheets of banks, investment funds and other companies around the world. Their depreciation will create such a “hole” in the global financial system that all the devils will feel sick. American including. Actually, here is the “decoding” of the Bloomberg forecast. Yes, they are right. The same dog with five paws (© V. Pelevin) is already on the warpath.

All this is by no means idle reasoning of the author. Recently, even the First Deputy Managing Director of the International Monetary Fund (IMF) spoke about the prospects for an imminent “fragmentation” of the global financial system Gita Gopinath.

In such an environment, only real values ​​are valued, pardon the tautology. Gold first. Any shares, if these are not controlling stakes in companies with real assets (fields, raw material reserves, factories, real estate etc.), nothing more than worthless pieces of paper. The situation with bonds was described above. With government. But the same will happen with corporate ones.

“We expect that due to geopolitical tensions and rising inflation around the world, gold will be able to reach its all-time high this year, despite the tightening of US monetary policy. Our short-term gold price target is $2,000 an ounce. If this milestone is overcome, the price of the precious metal could rise to $2,100 per ounce,” said a leading analyst at PSB Alexey Golovinov.

Foreigners are more accurate, without the traditional Russian managerial “blah blah”.

“Gold prices in the coming week will be determined by many factors. The first of these will be the movement of oil prices. Any sharp rise in oil prices will further increase inflationary pressures and support gold prices. In addition, the movement of the dollar index will also affect the direction of movement of gold. Any significant gains in the dollar will limit the momentum in gold prices,” explains Religare Broking vice president Sugandha Sachdeva.

There is something wrong with oil prices. Or rather, someone is doing it. Unrest suddenly broke out in Libya, both mining areas and ports were blocked, shipping was impossible. Minus 300 thousand barrels per day, and how long this will last is unclear. This is, let’s say, in addition to anti-Russian sanctions. By the way, there is also gas in Libya, which was going to be delivered to Europe. No more gathering. That is, they are going, but it is not clear when.

“Investors remain risk-aware as central banks embark on a policy of curbing raging inflation. The negative tone of market sentiment will support the demand for gold as a safe haven,” said a senior analyst at FXStreet Dhwani Mehta.

“Given a significant upward revision in investment and demand forecasts, we are raising our 3/6/12-month gold targets from $1,950/$2,050/$2,150/oz to $2,300/$2,500/$2,500/oz,” said the analyst team. Goldman Sucks.

$2,500 per ounce in the fall of 2022 is a lot! So, what is next? If we start from the IMF forecasts about the same “defragmentation”, then the strongest will be currencies backed by gold. There are no such people on Earth at the moment, but nothing prevents you from returning to the good old days, when this was the norm. Or just make all international transactions by converting them in gold equivalent.

What the new world financial system will look like is not yet clear even in the first approximation, but it is quite obvious that we will have to return to the 100% reserve system. That is, under 100 tons of gold, exactly the same amount of paper obligations is issued, and no more. The modern system, when the Fed and its other analogues print dollars (euro, pounds, yen…) in unlimited quantities, has already outlived its usefulness – it is not trustworthy. There is too much unsecured money in the world. First of all, dollars.

In this regard, let’s say, the reverse recalculation is appropriate. At current prices, one dollar can buy about 15 milligrams of gold, at forecast prices, only 12 milligrams. That is, by the fall, “green” has every chance to fall in price by a quarter at once!

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