November 2023 - Week 4 Edition

Forbes Sees $2,500 Gold in 2024… and Gold is Following His Command!

When I interviewed Forbes Magazine publisher and former Republican Presidential contender, Steve Forbes recently in Nashville, gold was trading under $2,000 per ounce. It has dipped as low as $1,930 in the month since then but when I interviewed him and the co-authors (Nathan Lewis and Elizabeth Ames) of his fine book “Inflation” my first question had to do with his role as “Merlin the Magician” in the musical “Camelot” at Freedom Fest: I asked the “magic man” to predict the price of gold. 

His quick answer is that gold would start the new year over $2,000 and “could well reach $2,400 in 2024 or soon thereafter,” especially if the economy doesn’t improve. Upon continued questioning, he said gold could make it to $2,500 if “the good side” doesn’t win the 2024 elections. If the wrong side wins, he could make a case that the deficits will increase faster and the Federal Reserve will buy more bonds again, which could trigger another rise in massive deficit spending and the inevitable inflation.

As if on cue, gold is already soaring well above $2,000 once again and it is closing in on its all-time high of $2,067, set on August 6, 2020. Also, silver is back over $25 an ounce, so “Merlin” is already working his magic.

Next, I asked him if we were in danger of experiencing any of the hyper-inflation that General George Washington (a character Steve played in “1776” at Freedom Fest) suffered in the Revolutionary War, when he wrote to the Continental Congress that a “wagonload of Continentals” (the paper currency of the day) “couldn’t buy a wagonload of provisions.” He answered that, no, we are not in danger now but we need to learn from history. The major reason our Constitution and the 1792 Coinage Act tied our currency to gold and silver was precisely because of the high inflation of the Revolutionary War era. We learned our lesson but the leaders of the French Revolution did not learn that lesson, so they inflated their currency.

When asked if we had a chance of going on a gold standard, none of the authors gave much of a chance of that happening any time soon but Nathan Lewis informed us that India started issuing gold government bonds, which he said would be “a key element because I think it could be a very popular investment.”

We also asked Forbes how he would advise a young person just getting started in gold, and he answered: “As a young person, I’d put money into a 401K, IRA or whatever, and then leave it alone. In terms of buying gold, you can start buying a coin here and there, but don’t try to trade it, because over time they’ll go up. You want that insurance policy. I don't call it investing in gold. I call gold an insurance policy from the follies of government leaders, which can treat currencies very badly. Gold is an insurance policy.”

Our closing question was whether he sees $3,000 or $4,000 gold, and he said, “at some point, yes.”

Merlin the Magician has spoken! As for me, I strongly encourage people to purchase physical gold now and to routinely add gold to their investment portfolio.

Another Major U.S. Treasury Debt Downgrade – to “Negative”!

This news didn’t make many TV stations – what with the war coverage and stock market euphoria – but Moody’s Investors Service just lowered its ratings outlook on the United States government’s debt from “stable” to “negative.” Pointing to the rising risks to our nation’s fiscal strength, stating, “In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the U.S.’ fiscal deficits will remain very large, significantly weakening debt affordability.” The recent “brinkmanship” over the debt ceiling debate also contributed to the downgrade: “Continued political polarization within U.S. Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.”

On August 1, another rating agency (Fitch) cut the U.S. long-term credit rating to AA+ from AAA, citing “expected fiscal deterioration over the next three years,” as well as an erosion of governance and a growing debt burden. Their political catfight over debt limits was also an issue. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

Unlike in August 2011, when a similar credit downgrade caused a major stock market crash and soaring gold prices, these debt downgrades in late 2023 did not impact most markets in a major way, but perhaps this is one of the reasons why gold has moved back above $2,000 per ounce.  Gold was $1,941 on the day of Moody’s downgrade (Friday, November 10), and gold has since risen by over $100 per ounce as of November 30.

Gold soared $30 on Tuesday, November 28, to over $2,050 an ounce, due in part to a weaker dollar and a Federal Reserve that seems clearly done with rate-hiking in this cycle. The U.S. Dollar Index has fallen 3.8% in November, and some Federal Reserve officials are indicating a softening of their rate-raising views. Geopolitical tensions in the Middle East also helped push gold higher.

The World Gold Council’s (WGC) latest report shows rising demand, especially from central banks, including a record 800 metric tons in the first nine months of 2023. Silver is rising too, for different reasons. Industrial demand is expected to reach an all-time high this year. Despite a slowing global economy, demand for silver in hot sectors like photovoltaic cells is soaring. 

In their latest newsletter, the Aden Sisters stated that lower interest rates and a weaker U.S. dollar are adding fuel to gold’s rise. They said, “If gold rises and stays above $2,005, its next upside target would be the May high near $2,055,” and that seems to have happened. They added, “Silver is also flirting with its May trend at $24. A clear breakout of $2,005 for gold and $24 for silver would be a bullish rise indeed.” 

Fasten your seatbelts! As for me, I strongly encourage people to purchase physical gold now and to routinely add gold to their investment portfolio.

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