Gold Prices Go Parabolic To Hit Record $2000+, Investors Hedge Global Fiat Money Printing Orgy

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Written by Dana Sanchez
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Gold prices go parabolic to hit $2000+ in a record-breaking rally fueled by uncertainty over covid-19 economic impact. Investors hedge global fiat money-printing orgy. Image: The Moguldom Nation

Gold broke the $2,000 mark on Tuesday, hitting $2,017 an ounce in a record-breaking rally fuelled by depressed bond yields and uncertainty over the covid-19 economic impact.

The gold price is still not an all-time high, Financial Times reported. That happened in January 1980 when the precious metal, adjusted for inflation, hit $2,800, according to the World Gold Council.

This year’s 32 percent rally made gold one of the world’s best-performing mainstream assets. Investors rushed to the safe haven, worried about the growing numbers of coronavirus cases and the impact of $20 trillion in fiscal and monetary stimulus from governments and central banks around the world. 

That’s 20 percent of global gross domestic product, Fox Business reported. Investor demand for gold has increased from 25 percent to 45 percent of the market.

“The root cause (behind the rally) is uncertainty,” said George Cheveley, a fund manager at Ninety One. “It’s uncertainty about whether the world plunges into recession next year or recovers, spurred on stimulus money.”

Bank of America strategists predict gold will reach $3,000 an ounce over the next 18 months.

“The global pandemic is providing a sustained boost to gold due to increased savings, growing inequality, vast capital destruction, declining productivity, rising public debt levels, and, most importantly, falling equilibrium real interest rates,” BofA analysts said.

A new U.S. stimulus bill is expected as soon as Friday. The $1 trillion HEALS Act was unveiled by the Senate last week and includes a second stimulus check, potentially $1,200 for single filers.

Michael Novogratz, who formerly led hedge fund Fortress Investment Group, described economic stimulus as a “global money-printing orgy” in an April interview on CNBC’s Squawk Box. “Money is growing on trees right now,” he said.

Novogratz said he’s buying “hard assets” like gold and also bitcoin. Novogratz founded cryptocurrency bank Galaxy Digital

Government policies have an impact on economic inequality, Mark Thornton wrote for the Mises Institute in 2015.

“The job of the economist is to make sure everyone understands that government policies have obvious effects that can be seen, but also have effects that are not seen. In most cases, the effects that are seen are some direct immediate benefit to a particular group of people. Likewise, the unseen effects have circuitous, indirect negative consequences on a large group of people that grow larger over time.”

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Typically, gold is at a disadvantage relative to government bonds — another classic haven for nervous investors — because it does not offer dividends or interest payments, FT reported. “But aggressive easing from central banks, including vast bond-buying programs from the U.S. Federal Reserve, means that the returns available to new buyers of bonds are slim.”

Relative to global stocks, gold is still under-owned by global investors, according to Bank of America. Less than 3 percent of their assets are in the precious metal compared to 1980 when allocations were as high as 6.2 percent. 

“People who look at gold tend to get characterized as ‘gold bugs’ and some do have that kind of blind-faith mentality,” said Jim Luke, a fund manager at Schroders. “But what’s drawing investors to gold now is not faith in gold itself, it’s much more a lack of faith in other things — central banks, governments and, in particular, a lack of faith in the availability of real returns elsewhere. Gold is the inverse of that.”