I have emphasized in my writings that in troubled times, one needs to seek out the use of “hard” assets as a means of wealth preservation. Paper money of any kind can drop to a value of nothing, but gold and silver cannot because the value they have is contained in their nature as metals. Therefore, it is why they are historically considered to be strong ways of preserving value, especially during troubled times.
In a report from Zero Hedge, the Bank of America has just said that amid the COVID-19 crisis, she expects to see gold prices nearly double to $3000 for one ounce.
Back in April 2011, just before gold exploded to a record above $1,900 following the US credit rating downgrade, we first said – and Kyle Bass echoed – that the main reason behind our long-running, bullish view on gold is that the Fed can’t print gold , unlike every other asset.
Today, with a 9 year delay, Bank of America has caught up with where we were at the start of the decade, and repeating virtually everything we have said – consistently each day for over 11 years – says that while “the size of major central bank balance sheets has been stable at 21 to 28% of GDP in the past decade just like the gold price” things are changing rapidly and “as central banks & governments double their balance sheets & fiscal deficits we up our 18m gold target from $2000 to $3000/oz.” And while it’s not all smooth sailing, with the bank warning that “a strong USD backdrop, falling equity market volatility, and weak jewelry demand in India & China may remain headwinds”, it is now clear that even Wall Street’s agenda is aligned with that of all those who have been calling that the biggest beneficiary of central bank lunacy will be the “barbarous relic”, one which according to the most clueless person of the 21st century only had value because it was “tradition.” And yet here we are, when one of the biggest US banks just said that gold is the “ultimate store of value.”
Who to believe: a pathological liar (i.e., a central banker) or someone who finally sees the light?
Incidentally, the name of the BofA report was “The Fed can’t print gold”, which was a delightful flashback to what we said some nine years ago. (source)
The Federal Reserve Bank can print as much money as she wants, but gold cannot be printed. Alchemists have tried to do this for centuries and failed, and central banks today can suppress the price using paper contracts for gold or silver, but not the actual price.
As more money printing happens, which it will, the US dollar will continue to decline in value. However, those in hard assets, one of these forms being metals, will be able to have one preserve his value over time.