Rising debt will lead to $10,000 gold

Growing debt levels in the developed world will continue to bolster gold into the foreseeable future, bringing with it the potential for the precious metal to eventually reach $10,000 an ounce, noted gold bull Nick Barisheff told a forum in Toronto.

The CEO of Bullion Management Group Inc. said that gold is now moving in lockstep with rising U.S. debt levels, and that given that debt levels continue to grow, support remains for gold to go much higher.

“Based on official estimates, America’s debt is projected to reach $23 trillion in 2015 and, if the correlation remains the same, the indicated gold price would be $2,600 per ounce,” he said according to a transcript of the speech. “However, if history is any example, it’s a safe bet that government expenditure estimates will be greatly exceeded, and the gold price will therefore be much higher.”



Mr. Barisheff illustrated the correlation between gold and debt in a graph during his presentation to the 18th Annual Empire Club Outlook Luncheon, shown below:

Mr. Barisheff did not give a timeline on when he expects gold prices to reach $10,000 (and judging from trends, it might not be for quite some time). But he is confident it will eventually get there.

“These events gave me the confidence to title my new book $10,000 Gold,” he said. “The book connects the many trends that will be directly and indirectly responsible for both the rising debt and the rising gold price over the next five years. It will be published this year.”

He adds that high gold prices will not only be the byproduct of rising government debt levels. Mr. Barisheff points out that central banks around the world have been net buyers of gold since 2009, helping to bolster prices. But the real game changers have yet to start buying on an equivalent level.

“While central banks have been net purchasers of gold since 2009, the real game changers will be the pension funds and insurance funds, which at this point hold only 0.3% of their vast assets in gold and mining shares,” he said.

He went on to add: “Continuing losses and growing pension deficits will make it mandatory for them to eventually include gold— the one asset class that is negatively correlated to financial assets such as stocks and bonds. When this happens, there will be a massive shift from over $200-trillion of global financial assets to the less than $2 trillion of privately held bullion.”

Financial Post