Gold has been rising fast over the last year. It’s reaching new highs, not seen for six years. In this blog I’m going to show you how gold reaching $5,000, $10,000 and even $50,000 is not just possible, but it’s actually likely. I am using the same analysis that gold analysts, like Jim Rickards, have been using and I’m just breaking it down into three simple steps. At the end, I’m going to tell you exactly how you should be positioned to take advantage of the growth of gold.
BUT GOLD IS ONLY AT $1,500…
I know that gold is not even at 2,000 yet, but I don’t think it’s going to be long before it reaches 2,000 and beyond. Economist Jim Rickards claims that gold will sail past 2,000 and reach 5,000 then 10,000 and all the way to 50,000.
Jim Rickards has been reporting on the economy for a long time, particularly the currency and gold system. I’ve been following Jim for years. He maintains that gold will be above 50,000 eventually. Even though I believe him, I wanted to do the math on this for myself. When I ran the numbers, I found it’s actually much easier than I thought for gold to get to 50,000. I think gold could even get to 100,000 and 50,000 might be conservative.
SHORT HISTORY OF THE PRICE OF GOLD
Up until 1971, which isn’t that long ago, the U S dollar and almost all currencies around the world were still tied to and backed to gold. Gold has been money for 5000 years. It was still money 100 years ago and a mere 50 years ago, the US decided to no longer back currency by gold.
In 1971, $32 equaled one ounce of gold. In other words, you could go take $32 and go redeem it and actually get an ounce gold for it anytime. Today, gold is up over $1,500 for one ounce of gold. Gold jumping from $32 to up over $1,500 is a big jump. We need to look at how that happened to understand how gold will make an even bigger jump to $50,000.
GOLD IS NOT MORE EXPENSIVE, THE DOLLAR IS WORTH LESS
Gold sat at $20 an ounce for approximately 150 years. It jumped from $20 an ounce to $32 an ounce around WWI. In 1971, when the US no longer gold backed currency, the price of gold started to rise from $32 to $200, $400, $500, and on up to $1500. It’s not that gold got more expensive. It’s that the dollar became worth less. As a matter of fact, the dollar lost over 95% of its purchasing power. Simply put, it just takes more dollars to buy gold today. An ounce of gold is still an ounce of gold. It just takes more dollars to purchase an ounce.
STEP ONE
The first step for gold to reach $50,000 is that the dollar collapses. This is something that I’ve talked about extensively. You can pop over to my YouTube channel and see all that I have talked about concerning the end of the dollar.
I am not the only one who knows the dollar is on its way out. All analysts are talking about this because it’s pretty much inevitable. The differing opinion that analyst have is whether or not the dollar will die because of massive inflation or deflation.
WE’VE SEEN THE DOLLAR COLLAPSE FROM INFLATION BEFORE
Some of the analysts who talk about the collapse of the dollar: Brent Johnson, Jeff Snyder, Jim Rogers. These analysts insist that we have seen money collapse over and over. One famous example was that in World War II in Republican Germany. People were having to get paid multiple times a day because their currency was losing value so fast. They would get paid and they would have to go purchase what they needed right away.
More recently, we’ve seen it happen Zimbabwe. I actually have a trillion dollar bill from Zimbabwe. We also saw the massive inflation in Mexico in the 80s. Mexico had to make a new peso and chop off zeros off of the old peso. Venezuela and Argentina are experiencing huge inflation as I type this.
INTEREST RATES AND INFLATION
We know inflation is happening from the money supply going up. The money supply going up drives interest rates down, as well. Interest rates around the world have been dropping. As a matter of fact, half the world’s governments today have bonds which are negative yielding. That means instead of paying interest to borrow money, you have to pay them to borrow it.
Because these countries have negative interest rates, everyone’s coming into the U S dollar for better returns. This is becoming a problem. We are starting to see all over the news the problem that it’s becoming.
SHADOW BANKING AND DOLLAR CREATION
One analyst that I’ve been following, Jeff Snyder, went on to talk about the Euro dollar and shadow banking. This is a pretty deep subject and I’m not going to go super deep into it right now. But, basically, you have this Euro dollar and shadow banking system where banks create money through debt. So, the fractional reserve banking system, they take like $100,000 of deposit and then they can create $1 million out of that and loan that out. They’re creating money out of debt.
The US has a minimum reserve requirements for banks. This means that the banks aren’t allowed to create more money than their minimum reserve requirements. But in Europe, the banks don’t have that. They don’t have the same reserve requirements and the banks in Europe are taking a few dollars and they’re creating unlimited amounts of dollars out of it.
As a matter of fact, the fed and the government do not even know how many dollars are in the system. They don’t know how much they’ve inflated the supply. We don’t even know how much money is out there.
DEFLATION AND THE COLLAPSE OF THE DOLLAR
The other side of the argument about how the dollar collapses is massive deflation, rather than inflation. Analysts like Peter Schiff, Jim Rickards, and Harry Dent are the analysts who subscribe to this thinking. Deflation leads to diminishing returns. In other words, the fed will pump money into the system and there will be little to no effect on the economy when deflation is in full swing. The amount of money that the fed pumps into the economy is inconsequential to any impact. Eventually, pumping money into the economy just doesn’t work anymore.
The experts agree that the dollar will collapse. There are varying opinions on how the dollar will collapse-whether through inflation or deflation, but we know the dollar will collapse.
STEP TWO
Step two of getting gold to 50,000 is that we go back to gold backed economy.
Jim Rickards has done a lot of research on this and he has a lot to say. Jim says that when the dollar crashes, which is the reserve currency of the world, the IMF is going to come in to save the monetary system with SDRs. Now the IMF is the international monetary fund, which is basically above the central banks. The IMF in essence manages all the currencies of the world. When the dollar collapses, they’re going to come in to save the monetary system because no one’s going to trust it anymore. If you can’t trust the dollar, what currencies can be trusted?
The IMF keeps what’s known as SDRs or special drawing rights. The SDR is a basket of currencies. When the dollar crashes, the IMF will come in with a new SDR and Fiat currency of the IMF. No one will trust the new Fiat currency and the IMF will have to go back to gold backed currency because there will be no confidence in money.
IS THERE ENOUGH GOLD?
One common response to the idea of gold backed currency that I hear is “there isn’t enough gold!” I recently made a video about China’s secret gold plan and you can head back to my channel and check that out. But, I am here to tell you that there is enough gold… at the right price.
Gold will have to be revalued. I’m going to show you how that works and a little history that tells us about having to revalue gold.
LEARN FROM HISTORY
At the end of World War I, England went off the gold standard to pay for the war. When England went off the gold standard, gold was $20 an ounce. England was a world superpower and they were fighting this world war and they simply ran out of money. They off the gold standard so that they could create more currency to pay the war.
After the war was over, Churchill said, let’s go back to the gold standard. Again, gold was valued at $20 an ounce when they went off the gold standard. When they returned to the gold standard, Churchill said “ok, it’s $20 an ounce again” John Keynes, the father of Keynesian economics, said that you can’t just go back to the old gold price because the money supply doubled.
Keynes warned that if you go back to the same gold standards it is going to cause this massive deflation which will lead into a depression. He recommended that gold be revalued to $40 an ounce since the money supply doubled.
As history tells us, Churchill didn’t take his advice. Unfortunately, Keynes was right. England had deflation and this led into the great depression. History has already learned this lesson for us. We know better now.
STEP 3
Step number 3 to getting gold to $50,000 is to do the math computations for the gold backed economy. The math to determine gold valuation is simple, but you have to understand how the gold system is set up.
We know that the fed went off the gold standard in 1971 and they’ve just been creating more and more money since then. How we do this math to figure out the price per oz of gold is to note the money supply for the major currencies and the ounces of gold that these countries claim to have. Next, we decide what gold standard we want. Do we want it to be 100% backed by gold, 50% backed by gold, 40% backed by gold? And, that’s it.
It’s not terribly complicated. I want to show you an example and then we can use real world numbers.
EXAMPLE MATH
If we had $100 of currency and I had 25 ounces of gold, $100 of currency, 25 ounces of gold, and I wanted to have 50% gold backed, well 50% of a hundred is 50. 50 divided by the 25 ounces of gold comes out to $2, so I ended up with $2 per ounce of gold.
M1 AND M2 MATH
Let’s take a look at the real numbers. The US dollar reported by the fed is about $4 trillion. The US government also reports that they have about 8,000 tons of gold. Now, that breaks down to about 256 million ounces. All right, so if the U S was going to go back to the gold standard and be a 100% gold, gold backed standard, they’d have $4 trillion divided by 256 million ounces, gives us a gold price of $15,625 per ounce. The US valuation is roughly 15,000 per ounce of gold, but that’s just M1 of the US dollar with M1 being the sum of currency held by the public.
M2 is M1 + savings accounts, money market accounts, money market funds, etc and is about $15 trillion. Let’s do the calculation off of the $15 trillion in M2 and eight tons of gold or 256 ounces. We take the $15 trillion divided by the 256 ounces, and that gives us a gold price per ounce of $58,500.
MATH FOR THE WORLD’S CURRENCY
Jim Rickards does not think that just the US will return to the gold standard. He believes that the IMF will step in and they would gold back ALL of the world’s currencies. Math is a little bit different. In order to do these calculations, we must consider all of the major currencies and all of the gold that these countries have together. Jim Rickards thinks that a conservative 40% gold standard is most reasonable. The math for 40% gold standard for all the world’s currency puts gold valuation at over $50,000, as well.
I still think $50,000 is conservative. These calculations do not account for the entire shadow banking system that I mentioned earlier. Some economist think that there have been so many Euro dollars created that it’s actually the world reserve currency, not the US dollar. If we assume that the Euro is as large as the dollar, not bigger, then we end up doubling the world gold valuation to $100,000. I still think that is a conservative estimation because the Euro is likely even larger than the US dollar.
$50,000 EVEN $100,000 COULD BE CONSERVATIVE
The amount of money that we have created since 1971 out of thin air is exponential. Estimates of global currency is 80 to 90 trillion. And to put that 80 to 90 into comparison, that’s tiny because of the derivatives market, which are these investment banks basically betting in the financial system. The entirety of the financial system is over 1.2 quadrillion. Now, I honestly don’t even know what that number is it’s so high. This graph illustrates how big 1.2 quadrillion is compared to the rest of the assets that we have.
I think you can see how conservative the $100,000 gold price is, right?
We have to have learned from Churchill’s mistake. We can’t just go back to the old gold standard price. We’d have to go back to a revalued one. Even if we had to err on one side, we’d want to err on the upside, not the downside because the feds are already doing everything they can to make sure we don’t go into another recession.
WILL THIS REALLY HAPPEN?
Finally, what’s the chance of this happening? I’d say the chance is very great. We almost certainly know what the outcome is to the buying power of the dollar. It’s only been since 1971. We’re less than 50 years into this experiment of having a fiat currency that’s not backed by anything. In 50 years, we’ve racked up 1.2 quadrillion dollars out of thin air. The system is falling apart. Governments around the world are paying people to borrow money. There’s no yield. We’re seeing smaller countries drop like flies right now all around us.
It’s really only a matter of time before the dollar collapses. It’s almost certain that it will happen, but, of course, we don’t know when it will. It could happen next year. It could happen 20 years from now. That’s the thing we don’t know. We just have to pay attention and watching the signs. That’s why I make these videos and blogs.
HEDGE AGAINST THE COLLAPSE OF THE DOLLAR
I’m trying to keep you up to date. We need to buy assets now that keep up with inflation because holding only dollars, you’re just going to be losing money, losing money. If you diversify your portfolio and put some of your money into assets that inflate up, you’ll keep up with inflation. We also want to hedge against a collapse. We do that through buying gold, precious metals, gold miners, etc. Remember, as the value of the dollar erodes, the price of gold will increase. We know it’s eroding. Are you prepared?
To your success.