Gold Is Set to Crash? No Way!
The mainstream is a fickle place.
On the one hand, we had Bank of America raising its 18-month price projection for gold to $3,000. On the other hand, some people argue the price of gold could crash later in the year.
Gold is up over 13% on the year, but the yellow metal has seen some price pressure over the last couple of days as various government agencies have started to move toward reopening the economy.
An article published by CCN offers three reasons gold could “crash to earth” in the coming months – none of them particularly compelling.
- A coronavirus vaccine.
- A quick economic recovery
- Deflation and a soaring dollar
The first two reasons both embrace the mainstream narrative that the economy was great before the pandemic and that it will quickly go back to “normal” as soon as governments open things back up again. But there is no normal to go back to. The economy wasn’t normal before the pandemic.
Coronavirus was merely the pin that popped the economic bubble. Everybody is still fixated on the pin, but getting rid of it doesn’t stop the air from coming out of the bubble. A coronavirus vaccine would ease the pandemic, but it wouldn’t do anything to address the malinvestments and debt that were already rampant in the economy before coronavirus reared its ugly head.
In fact, gold was already on an upward trajectory before COVID-19. In 2019, the yellow metal charted its best year since 2010. The price increased by 18.4% in dollar terms. This was in large part due to the Fed’s pivot to loose monetary policy last year. Keep in mind, the central bank was already cutting interest rates, running repo operations and relaunching quantitative easing prior to the pandemic. The response to coronavirus simply put the Fed’s extraordinary monetary policy into hyper-drive.
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