Prediction 4 – Gold Heads Towards $3,000 An Ounce
Again, the prediction itself failed to materialise, but the arguments behind it remained valid. As I described last year, these “predictions” are not really predictions at all, in the conventional sense, but only a description of existing material conditions, and the processes unfolding from them. As with the other predictions, the fact that governments, everywhere, again imposed lockdowns, restricting economic activity, and at the same time, introduced additional liquidity, which flooded into asset prices, explains why the process described was again waylaid.
Yet, it has simply created the conditions, whereby, the process itself will simply be exacerbated. Part of the argument set out was that, rising inflation will cause the price of production of gold to rise. Across the globe, inflation is rising sharply, and as central banks have put themselves way behind the curve as they have tried to keep asset prices inflated, they run the risk of allowing inflation to run out of control. Sharply rising inflation, means that the prices of all inputs from materials and energy, used in gold production, themselves rise. The price of production is this cost of production, plus average profit, and as money profits will also rise along with inflation, that means the price of production of gold, as of other commodities will rise.
Those rises did not feed through last year, but look set to do so in the year ahead, and as the ability of governments to continue to hold back economic activity using COVID as an excuse shrinks further, unless they resort to more overt methods of Bonapartism to do so, and to hold down wages, as they allow prices and profits to rise sharply, then that will intensify in the year ahead.
We have seen central banks everywhere having to start to raise policy rates, and reduce QE, and even to talk about QT. That combined with rising inflation means that all of the arguments set out last year as to why speculators will seek to abandon paper assets, and worthless assets such as Bitcoin, and move to assets with real value such as gold, silver and so on will intensify.
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