Future Gold Prices

The internet is filled with predictions for the price of gold, from $500 to $50,000 per ounce.It depends on your world view.

If you are a central banker or a powerful financial player which often supplies loyal employees to serve as Secretary of the U.S. Treasury, the low gold numbers look good.

Or, if you understand the incredible $200+ Trillion of debt the world has accumulated and realize it can’t be repaid, then gold at $10,000 probably looks inevitable. Crashes occur and sovereign debt markets look like paper bubbles with disastrous potential to send gold much higher.

A better approach to estimating future gold prices, in my opinion, is to start with a world view and project relevant gold prices.I suggest three simple scenarios, as I stated in my article, “Silver Prices in Five Years?”

Scenario One – status quo:  The next five years could look much like the last 20 – 40 years. Politicians spend too much money, debt expands exponentially, central banks monetize debt and desperately inflate and reflate bubbles to maintain their power and continue the transfer of wealth from the many to the few. This is “status quo” or “more of the same” and indicates that gold prices will rise substantially, but not in a hyperinflation.

Scenario Two – deflationary crash: Deflationary forces overwhelm the financial system and central bankers and politicians can’t or won’t reverse those deflationary forces.In that scenario most paper assets crash while the purchasing power of gold increases far more. Central bankers will do almost anything to avoid this scenario.

Scenario Three – deflation and hyperinflation: Deflationary forces temporarily crash the financial system (signs are visible in 2016-Q1), and eventually central bankers and governments inflate currencies, possibly to hyperinflationary levels in their heavy-handed reaction.In this scenario gold prices will go into the stratosphere – perhaps $5,000 or $50,000+ per ounce. The ultimate gold price in a hyperinflationary scenario is unpredictable since hyperinflationary forces feed upon themselves and destroy purchasing power unpredictably. Gold reached nearly 100 trillion Weimar Marks per ounce in 1923.Gold, if currently priced in 1945 (pre-devaluation) Argentina pesos would be over 10,000 trillion 1945 pesos. Hyperinflation is an ugly, destructive, and unpredictable process, even for a reserve currency.