Gold will go to $5,000 by 2020.
This prediction may sound absurd right now, when gold is trading at $1,200, but there are a few factors at play that could send the precious metal prices skyrocketing even before then.
The top three factors that have the ability to send gold prices past their all-time highs are as follows:
1. Money supply around the globe increasing at a rapid pace
2. Governments spending without remorse
3. Financial markets becoming way too irrational
Money Supply Soaring
It has been broadly argued that the Federal Reserve has printed money, thus increasing the money supply in the U.S. significantly. Understand this; the Federal Reserve isn’t the only central bank doing this. Look anywhere in the world, and you will see that money supply is increasing at a staggering pace.
Why is increasing money supply dangerous? It comes down to basic economics; when there’s too much of something, its value becomes lesser. The more money is printed, the lower its buying power becomes.
Take the M1 money supply for the United Kingdom (U.K.) for example; this is physical money, demand deposits, and other similar accounts.
In the beginning of 2000, the M1 money supply in the U.K. was 405.65 billion pounds. At the end of 2014, it stood at 1.36 trillion pounds. Simple calculation will tell you that over 14 years, money supply in the U.K. increased over 235%. In other words, there is three times more money circulating in the U.K.’s economy now as there was in 2000. (Source: Federal Reserve Bank of St. Louis, last accessed June 2, 2015.)
Take Australia as another example. In the first quarter of 2000, the country’s M1 money supply stood at AUD$124.60 billion. In the last quarter of 2014, it was AUD$310.80 billion. This represents an increase of close to 150% over 14 years. (Source: Federal Reserve Bank of St. Louis, last accessed June 2, 2015.)
Australia and the U.K. are just a few of the many examples of developed nations where money supply has skyrocketed. In developing countries, these figures are much worse.
For instance, in India, in January of 2006, the M1 money supply stood at 7.48 trillion Indian rupees. In December of 2014, it was 22 trillion rupees. This represents an increase of 194% in a matter of eight years. (Source: Federal Reserve Bank of St. Louis, last accessed June 2, 2015.)
As money supply increases, currency value will be in jeopardy. As a result, demand for gold will increase.