The author of the best-selling book ‘Currency Wars’ talks about his new book and why gold will rally in 2014
Epoch Times: What about gold?
Mr. Rickards: Gold has a number of vectors. It is technically set up for a massive rally. Let me separate the fundamentals from the technicals. Fundamentally my target price for gold is in the range of $7,000 to $9,000 per ounce. That’s not something that will happen straight away, but it’s not a 10-year forecast either. It’s a three- to five-year forecast, for the price to rise by about five to six times.
Epoch Times: What is the analysis based on?
Mr. Rickards: It’s based on a collapse of confidence in the dollar and other forms of paper money. To restore confidence you have two means: You either flood the world with liquidity from the International Monetary Fund in the form of Special Drawing Rights [SDRs, a form of money issued by the IMF], or we return to a gold standard.
The flooding of the market with SDRs would be highly inflationary, so that by itself would drive gold to a higher level. If they go back to a gold standard they will have to take a non-deflationary price.
People say there is not enough gold in the world. The answer is there is always enough gold in the world. It’s just a question of the price. Now, at $1,300 an ounce, there is not enough gold to support world trade and finance. But at $10,000 per ounce, there is enough gold. It’s not about gold, it’s about the price.
If you go back to a gold standard you have to avoid the blunder that England made in 1925, by going back to the gold standard at the wrong price, which proved to be highly deflationary, and contributed to the Great Depression.
I’ve done the math on that and the non-deflationary price for a gold standard today is about $9,000 per ounce.
Epoch Times: Gold investors would make a killing!
Mr. Rickards: It wouldn’t mean gold would be worth any more [in real terms]; it would just mean the dollar has collapsed. But yes, you get more dollars for the ounce. Let’s call that the three- to five-year forecast.
For the year ahead, those fundamentals are unlikely to play out in a year. But the technicals can play out. Technically, gold is set up for a major rally based on the decline in floating supply.
Source Epoch Times