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Gold Price Expectations for 2016

Douglas MacQuarrie, President & CEO, Asante Gold Corporation, CSE:ASE

All markets always revert to the mean. The current environment of low commodity prices will correct up to the mean and in fact overshoot the mean in the next bull commodity cycle followed by the next, inevitable, bear market correction.

 

For investors this normal commodity and business cycle has been completely perverted by government interference in the marketplace - poorly thought out and desperate re-inflation policies such as Quantitative Easing 1 & 2 and other short term printing press fixes, negative interest rates, etc.

 

These cannot 'fix' anything but only delay the now close and inevitable popping of the bond, stock and real estate bubbles. This of course will collapse the massive highly leveraged derivative markets and all things speculative.

Unlike the 2008 WFC, neither the Central Banks nor the IMF have sufficient free capital reserves to buy their way out of this one. Gold in your possession will be the one survivor, as it always has been.

 

Negative interest rates currently being promulgated by central bankers and PhD economists are in the realm of fairy tales - they cannot work. They wrongly assume a mass Human reaction to complex economic problems can be ‎programmed into simple computer algorithms.  They can't. Adam Smith's 'silent hands' of the independently thinking and acting masses are far smarter!

 

Negative interest rates steal the earnings from savings from every human on Earth. They devalue cash regardless of the currency. ‎They make gold a far more attractive investment. Unfortunately for most savers, there is an unlimited amount of cash to 'fly' to safety and very little free, unallocated gold in the World. The price movements in gold, should only a tiny bit of this cash move to gold, will be spectacular.

 

Other commodities - oil, copper, lumber, frozen pork bellies etc are subject to usual over supply/undersupply market conditions and will lag gold in the current depressed World economic environment.

 

Gold, in times of economic stress like we are now in, doesn't behave as a commodity, but instead as real money. Gold has been the basis of our money for 4,000 years. Nixon said it wasn't in 1971 when the US defaulted on its backing of the US$ with gold, but privately the World continued to hedge their US$ 'risk' with gold.

 

On the other, top end of the cycle, gold will be massively overvalued and over supplied by new mines and supply coming on stream and will then trade like a commodity again and revert lower to its mean.

 

Our short term target for gold is US$1,350 - which is simply the 5 year moving average.

 

Disclaimer: Views are personal and not the views of the publisher.