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May 15, 2024 - Epoch Times
20:19
$4k Gold Ounce? Geopolitics Pushes Gold to New Record Highs
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Right now, with geopolitical conflicts and actual wars raging across the whole world, as federal money printing is leading to inflation that's completely eating away at the purchasing power of our money, as central banks around the world are in the process of implementing digital currencies, well, the end result is that the price of gold has skyrocketed and it's reached all-time record highs.
And so, in order to get an insider's look at the industry, what the demand and supply are looking like behind the scenes, As well as some possible scenarios for what the price of gold might be in the near future, I sat down and spoke with Mr. Max Baker.
He's the president of American Hartford Gold, which is my own personal gold and silver dealer, as well as a long-term supporter of the show.
All right, Max, thank you so much for joining us.
To start with, you know, for the past week, I've been very satisfied owning gold.
The price has been surging.
I just checked this morning.
It's north of $2,400 right now.
So maybe to start with, what's leading to the spike in the price of gold?
It's got a lot of drivers right now, mainly central bank buying.
They're buying at the fastest clip in 55 years.
Obviously war with what's going on with Israel and Iran at the moment.
That's a very volatile situation and gold being a safe haven, it's benefiting from that.
And then money printing.
We're printing an awful lot of money right now and gold is a hedge against that.
It's a hedge against a devaluing dollar.
And we're seeing inflation figures come out, and inflation is actually accelerating after the last CPI.
And with that, folks are taking notice and moving into a safe haven that's a hedge for that.
You mentioned war.
Can you give the viewers a bit of a concrete understanding of how war affects the price of gold specifically?
Sure.
So, you know, you buy gold for what you don't know, not what you know.
And we are kind of in the great unknown.
This is uncharted territory with what we're seeing with two major wars going on between Ukraine and Russia.
And now you've got Israel and Iran.
Those are two pretty big powers with massive militaries, and they're very unpredictable.
It's one of those things where people are taking refuge and something that, you know, that has proven to be an insurance policy.
So, again, it's just something we haven't experienced.
We don't know where we go from here.
Maybe it de-escalates, but maybe it doesn't.
And maybe, you know, a whole lot of allies get involved and it turns into something pretty major.
So there's people just kind of taking risk off the table and moving into something that They feel we can hide out here.
And then when we know more, then we can possibly move out of it.
Hmm.
Let me ask you this.
So you mentioned the two different conflicts, the one in Eastern Europe and the Middle East.
So I know that when the Ukraine-Russia war kicked off, the price of gold spiked and it breached 2,000 for the first time.
And then it sort of stabilized there.
And that war, of course, didn't end, but it sort of stabilized there.
And then when this conflict in the Middle East kicked off, It jumped again to now it's like $2,300, $2,400.
Is it the case that if those conflicts dissipate, you know, in one way or the other, they go away, will the price of gold sort of dip back below to pre-war levels?
Or will it find a new equilibrium because of all the other factors that you mentioned, like inflation and central bank purchasing and money printing?
Yeah, it's a great question.
And because there's so many drivers for the gold price, gold is going to remain very buoyant.
Gold has had a very impressive run since October, as has the stock market.
And whenever the stock market runs upward, Gold should have an inverse relationship with it.
Gold should pull back pretty significantly.
The stock market's been ripping since the fall, since September.
The dollar is near highs against other currencies.
When those two things are happening, gold should pull back.
We should see gold at $1,600, $1,500.
And that didn't happen.
It's been remarkably resilient because of the central bank buying, because the amount of money that we're printing, and war is just kind of, you know, adding that extra little boost.
So if war goes away, we still very much have the central bank buying, and we still very much have inflation, and we still very much have money printing that are going to maintain that price.
Yeah.
Well, it's funny you mentioned the stock market because it's like, yeah, it is, it's also rising, but the stock market rise is heavily weighted on like a handful of tech companies, right?
So it's like, yeah, it's rising, but then you might say, well, then why is gold rising?
And I would posit that it's almost A bit independent of each other because like, okay, you do have a few tech companies, Nvidia, Apple, like a few of them on the upward trajectory and they're sort of carrying the whole market with them.
But then the gold price, it almost seems to be a reflection of the weakening dollar, independent of the stock price, stock market as a whole, because I... Yes.
Do you agree with that?
You just described it perfectly.
In the past, we've seen the market and gold have an inverse relationship.
But where we stand right now, because of what's going on with the dollar and inflation, they are very independent.
So they can continue to rise together.
And you're right about the stock market.
I'm not a stock expert or a financial advisor, but it seems to be pretty fragile with the entire success of the market hinging on a few companies.
Being actually in the industry, what are you seeing right now?
Are you seeing a lot of buying, a lot of selling?
And also, when it hit that $2,400 mark, or that $2,300 mark, does buying slow down, where people are a little bit like, ooh, it's a little bit too hot, let me sell?
What are you seeing on the back end?
You know, we're seeing a lot of buying right now.
Yes, it is at all-time highs, but there's projections coming out.
You know, you had UBS just this past week call for gold to $4,000 an ounce.
You have Citibank and Bank of America calling for $3,000 an ounce.
And a lot of this is like from from 2000 until now, we've had an awful lot of money being printed.
The M2 money supply has gone up exponentially and we're just now starting to see gold in the first, second, third inning of the rally.
So we're not getting a lot of people selling because they see the writing on the wall with all the money printing.
I would tell you right now that if Washington came out tomorrow and said, hey, you know what, we're going to get this budget in check.
And we're not going to print any more money.
And we're really going to settle down and tighten the bootstraps.
I would say, hey, you know what?
You should probably sell some gold, take some profit right here.
But Washington's not saying that.
Washington's saying, let's print trillions more dollars.
The debt is going up another trillion dollars every hundred days.
Every hundred days, another trillion dollars.
And so people are seeing that writing on the wall.
And it used to be just kind of a safe haven hedge in case something happens.
And now you're seeing a real shift into people putting money into gold as more of a currency than anything else.
You're seeing that shift of, I need to have gold as my stable currency.
I don't know what's going to happen with the dollar.
We're printing trillions of dollars.
You know, Biden's new plan is a $7 trillion plan.
Bank of America came out, I believe it was three weeks ago, their chief strategist, and said, if we don't get this money printing under control, the dollar will crash.
You know, and we're talking about what the first or second largest bank in the world, their chief strategist, saying the dollar will crash unless we get our spending under control.
And literally a week later, Joe Biden came out with a $7 trillion spending plan.
So, you know, people are starting to understand that and grasp just how much money is printed over the past four years.
And they're losing faith in fiat currency a bit.
And so with that, I believe we're still very much in the second, third inning, second inning of this rally.
And you know, don't leave before the miracle.
So you got a lot of people holding on, holding on tight to their gold.
Oh, interesting.
You know, when you were describing that, it just made me...
I think of the fact that, like, if you look at the Forex, for instance, sometimes you think, oh, actually, the dollar is doing, you know, really strongly right now.
But that's, it's doing strongly compared to other currencies that are also just fiat currencies, you know, across the world.
It's, like, strong compared to those currencies.
But gold almost seems like it's like a...
It's like a reality check.
It's like, well, you think you're doing well against the euro, against the yen.
Sure, they're not tethered to anything.
You're doing well against these hot air balloons all going up at once, you know, not tethered to the ground, but against an actual hard currency like gold, it's not doing well.
And it seems like it's a reflection of that.
So you're basically saying, unless there's the will in Congress, Gold is up.
I believe it was Mark Mobius, you know, famous investor, billionaire who coined it, but he said, you know, gold's going up, up, and up because the money supply is going up, up, and up.
And that's just the way that it works.
And so if you look at things as a whole, every nation out there, we're just going to keep printing.
And Congress, Washington, they can't stop printing because they want to get reelected.
And when you start cutting programs and start cutting costs, people don't like that.
And we've gotten very much people addicted to some of these programs and some of these handouts.
Well, let me ask you this.
You know, one thing that might really happen in the near future is that the Fed might cut rates.
I mean, you know, we see these jobs reports and these different economic indicators coming out, and it's not unreasonable to assume that they will cut rates soon.
You know, nobody knows when it'll happen, but they might do it soon.
I've seen analysts Describe what will happen to housing prices if that were to happen.
If rates go back down to 5, 4, even 3%, likely the cost of housing will skyrocket.
Let's say like an $800,000 house might go up to like $1.1 million in a matter of a few months.
That's right.
If the Fed were to cut rates, how would it affect the price of gold?
Great question.
So, Fed kind of has its back up against the wall right now.
You know, they can cut interest rates and let inflation run wild, or they can maintain interest rates or even raise interest rates.
You know, UBS was talking about we might have 6.5% rates by next year, which would lead to a pretty hard landing.
You know, to get inflation under control.
So the Fed either has to, you know, maintain rates or raise rates to get inflation under control.
Or, you know, risk sending us into a recession where they can cut interest rates and save us from a recession.
So that's kind of a back up against the wall scenario there.
Gold will very much benefit from rate cuts because the dollar, you know, the DXY will certainly fall when they start cutting interest rates.
And when that happens, we'll see gold rise.
We saw gold rise significantly when the dollar fell from 90 to 70 from 08 to 2011.
You know, gold skyrocketed, went from 700 to 1900.
We'll see more of the same this time around if we get into a big cutting cycle, because again, the dollar will fall, that inverse relationship, gold will rise.
Yeah, I look back at that period of time and I think I should have been buying gold, but I was too busy being in high school at the time.
Sure, right, same here.
So let me ask you this.
So you mentioned a few different reports like the Citigroup report that said within the next, I believe, their analysis was like within the next 18 months they expect it to be like $3K announced, $3,000 announced.
Sure.
Let me get your perspective, you know, being on the inside and you obviously have your finger on the pulse of the market.
Can you give us sort of three predictions, like a bearish prediction, like a neutral prediction, and a bullish prediction on the price of gold, and what factors would lead to those different scenarios?
Sure.
So, you know, first one would be a bearish.
I would say bearish would be they cut rates maybe a quarter percent and nothing really happens and gold kind of maintains where it's at.
You know, we're at 2400, 2300 neighborhood.
I think a neutral path would be that this war escalates.
Central banks continue to buy at the clip that they're buying at right now.
Inflation remains hot.
And with that, you're going to see gold around $2,700.
If Washington continues to print the way that we're printing, if war continues, if a digital dollar is launched at any time in the next couple of years, really it comes down to, again, war, central bank buying, money really it comes down to, again, war, central bank buying, money printing, inflation, digital Those factors come to play.
We're looking at $3,500 to $4,000 an ounce gold, no problem.
Really, gold didn't do much from 2002 to 2003, and you're seeing all this money being printed.
I remember looking at the charts just asking, why isn't gold really moving yet?
And now it's starting to show that resilience, regardless of what's happening with the dollar, regardless of what's happening in the stock market.
And it's because of the money printed.
And the cat's out of the bag right now.
And so gold has just started its rally.
And I think we're gonna see a bull market for many years to come. - Wow, so I was actually surprised by your answer.
So you were saying even like your most bearish, like most conservative estimate is that it'll maintain its current price over the next year plus.
You're basically saying that there's enough demand from central banks and from the private sector to maintain it right now where it's at.
So the question between neutral and bullish is just up.
Like, is it going to go this up or this up?
There's just too many factors that are working in its favor to send it up and nothing working against it right now that it's creating a very solid foundation, a very solid floor where it's at.
That's fascinating.
Let me ask you this.
So besides, we've obviously centered the discussion on gold.
What about silver right now?
What's your opinion on the price of silver relative to the price of gold?
Yeah.
Silver is pretty volatile as a metal because it's got industrial and then obviously has some currency applications to it as well.
Silver hasn't had its big rally yet.
It is up, I believe, 33% since October.
But it's still very undervalued from where I believe it should be.
It does act later.
It's kind of later to the party than gold is.
But you will see some big moves in silver.
We saw the same thing again from 08 to 11.
Silver was, I believe, floating around $10, and then it ran up to $49.
We could have another major move like that, where it starts moving two, three dollars at a time.
So it is tremendously undervalued right now.
It hasn't quite caught up to gold, where it should be, the gold and silver ratio.
But it's got a lot of room to run still.
That was my next question.
Can you explain to the viewers who don't know, what is the gold-silver ratio, what has it been historically, and what is it now?
Yeah, historically, you know, gold and silver is how many ounces of silver does it take to buy one ounce of gold?
And historically, it's a 16 to 1 ratio.
And the past couple of years, we've flowed anywhere from a 70 to 1 ratio to a 90 to 1 ratio.
So it's a little out of whack at the moment.
And the 16 to 1, that's, from my limited understanding, that's like a long, long time.
That's a very long-term ratio that goes back like thousands of years.
Correct.
Yes, yes.
Very long historic look.
I don't anticipate we'll ever be back to that point, but certainly getting more in line to like a 40 to 1, 50 to 1 will be super beneficial for silver.
And I think it is getting harder and harder to mine to pull it out of the ground, getting more and more expensive to mine.
And silver will be probably the biggest benefactor of any kind of rate cut because you're going to see that dollar pull back significantly.
And when that dollar pulls back on the DXY, silver is kind of like keeping a balloon underwater.
You're going to see it or a beach ball underwater.
You're going to see it shoot up pretty quick.
You know, in regards to silver, I was thinking about it recently, because I personally have been stacking a lot of silver over the last eight years now, and I was debating in the last week about whether I should Like, increase my position in silver or gold.
And then I was, my concern about silver was that a lot of companies right now are pulling back from the EV craze, I guess you can call it, that's been like, you know, building up over the last year.
You know, Hertz is a great example.
They went all in on the EVs and then recently they had to sell them all because there was just no demand, no interest in them.
They were creating a ton of problems.
Right.
And same thing with manufacturers.
They're pulling back on that production.
If that trend continues and there's less interest in EVs or even there's less interest in renewable energies that require more batteries and more silver, will that kneecap the support?
What's your opinion?
Or is that independent of the precious metal side?
Yeah, so that's a really good question there.
It certainly doesn't help if they're using less and less of it, but we use it in so many different kinds of consumer electronics, not just EVs.
And there is going to be a major shortage of silver because, again, it is getting harder and harder to mine.
It's getting more expensive to find new mines.
And if you read some of these reports coming out of the mining companies, They're talking about, hey, just scouting and finding new minds to find silver is getting harder and harder.
We don't have any new big supplies coming or that we see in the foreseeable future.
And again, pulling it out of the ground is getting more and more expensive.
And then when you put in there the precious metal aspect of it and then what's going on with the dollar, interest rates, money printing, there may be a couple negatives against silver.
But I believe there's four or five positives for it that will maintain where it's at and then even help it grow in price.
I got to say, I think you've had me on two or three times now over the past couple of years.
And I feel really smart because we've been talking about gold and silver.
And obviously I sell gold and silver.
So not to be disingenuous, but we were talking about gold and silver when it was at $1,500, $1,600.
And now it's at $2,400.
And we've been talking about it over the years.
And, you know, some of our price predictions and some of, you know, the things that we've talked about that could happen have very much happened.
And, you know, it feels nice to be right.
So I guess we can kind of pat ourselves on the back a little bit.
Yeah, I was going to say, our last interview was at the end of last year.
I think it was in December of 2023.
And I asked you, you know, what's your prediction?
I think for the next quarter, I forgot the time frame, but you said like, you know, I foresee it being like 22, 2300.
And here we are in April and it's at 2400.
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