Investors shouldn’t rush to buy gold because they fear a crisis or hyperinflation. For gold, it’s now about the expansion of the central bank’s balance sheet, Munson told Kitco News, adding that gold will rise to $ 2,200 before the Federal Reserve begins to raise rates.
“I don’t buy gold for a crisis. I buy it because when there is a crisis, and I think central banks are going to print money like there is no tomorrow, this is the time when I want to have a bigger possession of gold, ”he said. “My ultimate goal in this money printing cycle is $ 2,200 an ounce. It’s between here and when the Fed starts to rise. “
Munson makes a distinction between rising gold as the balance sheet expands and not inflation fears, as not all countries will end up experiencing hyperinflation with massive money printing. But gold will always be a winner anyway.
“I don’t think inflation and gold are really closely related. The movements of gold are linked to inflation. One of the biggest problems people have with gold is rambling around saying it’s a hedge against inflation. But this is not necessarily true. inflation in the 80s and 90s, and gold fell. But, when there are countries outside of the United States that have hyperinflation and the silver is degraded, gold is store value. It has been like this for thousands of years. This is why people buy it because they fear their currency will be degraded, ”explained Munson.
To better understand the evolution of the price of gold, investors should watch the expansion of the money supply. “It’s the expansion of the federal balance sheet. To me that’s what really pushes the price of gold up from just accelerating inflation, ”he said.
And right now, the United States is going through a period of money printing that won’t end until the first half of 2023. “And if the past is anything like the future, which it should rhyme, then the past is something like the future. gold has some legs beyond the crisis. Munson pointed out.
Additionally, the Fed is forced to hold rates lower for longer whenever there is an environment of recession in light of all the corporate and household debt.
Inflation is certainly a risk, but people are overreacting to the extent of real price pressures, he added. “Reaching 3% inflation would be very dramatic. And I think a lot of people think of the kind of inflation in the late ’70s, early’ 80s – when gold hit its peak. I don’t think that’s the magnitude we’ll get, ”Munson said. .
The US Treasury and Federal Reserve are more concerned with deflation than inflation, and all they want is to see if the US economy can even exceed and stay above the inflation target. by 2% for a few consecutive quarters.
“The Treasury and the Fed need to keep these rates lower so they can continue to stimulate because right now they are concerned about deflation, not inflation, and this is regime change,” noted Munson. “And so we have regime change on gold because now our central bank is much more concerned with trying to hit 2%, 2.5%, 3% for over a month. “
Many investors assume that inflation will rise and that the Federal Reserve will overreact. Munson added that he was not convinced that would happen.
“There’s a lot of evidence that gold is responding to just expanding this balance sheet. I understand that in many situations and in many different countries, expansion of the balance sheet leads to hyperinflation due to currency degradation. But I think it’s too easy for the United States to read. It’s more about the amount of money printed, not necessary if there is core inflation, ”Munson said. “We are choosing a popular path of modern monetary theory. And everyone in the world knows it. This is why the US dollar will continue to struggle. “
But the Federal Reserve is unlikely to lose control as it controls the currency and rates, he said.
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