Citigroup is the latest major bank to join the gold bulls. In the bank’s 3Q commodities outlook, Citigroup says it expects gold prices to break alltime price records within the next six to nine months. And it believes there’s a 30% chance gold will top $2,000 in the next three to five months.
At last look, gold for August delivery was trading at $1,820 an ounce.
Citing the Fed’s loose monetary policy, low-interest rates, record inflow into gold-back ETFs, and rising asset allocation, Citigroup analysts wrote:
Nominal gold prices have already posted fresh records in every other G-10 and major EM currency this year, so we believe it is only a matter of time for fresh gold-USD highs.
Citigroup has now joined a growing list of major banks that are expecting gold to break price records within the next few months. Goldman Sachs, for one, said it expects to see gold top $2,000 in under 12 months. Meanwhile, Bank of America (through Merrill Lynch) gave a now-famous 18-month price target for gold of $3,000 an ounce back in April.
The major banks are among a growing coalition of gold bulls that have also attracted celebrity investors, like Jim Cramer, and an army of new retail consumers over the past few months. That army skyrocketed demand for gold ETFs during the first half of the year, which saw record inflows worth nearly $40 billion. Such buying clearly indicates investors are uncertain about the future of the economy.
More economic fret can be found in earnings reports last week from U.S. major banks, which reported a huge spike in cash reserves. The country’s six largest banks reported adding some $36 billion to their cash reserves during the second quarter, also suggesting an uncertain economic outlook.
JPMorgan CEO Jamie Dimon commented, “In a normal recession, unemployment goes up, delinquencies go up, charge-offs go up, home prices go down. None of that is true here,” adding, “You will see the effect of this recession; you’re just not going to see it right away because of all of the stimulus.” In other words, Dimon is just repeating what we’ve been telling you for weeks now: The Fed’s $3 trillion intervention didn’t fix or repair the economic problems caused by COVID-19. It just kicked the problems down the road for a few months.
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In just nine weeks, between March 9 and May 11, the Federal Reserve added $2.3 trillion dollars to the money supply as measured by M2.
That’s $36.5 billion a day –– or over $425,000 every second!
Let me put it to you like this…
In the nine weeks between March 9 and May 11, the Federal Reserve increased the supply of U.S. dollars by almost 15%!
Please take a moment to let that sink in…
The Federal Reserve increased the money supply by 15% in nine weeks.
The Fed created more new money in those nine weeks than it did in four years of quantitative easing programs in response to the 2007 to 2008 financial crisis.
How can that not seriously affect the value and credibility of the USD and not have long-term economic effects for the nation?
It can’t.
Eventually, the chickens will come home to roost. They always do. As such, that massive pile of new money will soon come back around to bite the economy in the ass –– that’s when gold prices really take off.
I believe most of the major U.S. banks are a bit too reserved with their predictions. In just about 12 months, between 2010 and 2011, gold prices shot up over 70% from about $1,100 to $1,900 an ounce. An increase of 70% from current prices takes gold to over $3,000 an ounce. But remember, the 2011 rally was different. The Federal Reserve didn’t add 15% to the money supply overnight.
Calls of $5,000 gold, or even $10,000 gold, are beginning to look more and more realistic. It’s important to remember, though, rapidly rising gold prices more often than not means a short-term rally. In other words, once the gold bull starts to take off, it’ll probably be too late to make any serious amount of money for investors. And as I mentioned on Friday, it’s going to be a wild ride on which we’ll need to be very active to maximize our profits.
Chris DeHaemer and I are planning to go full throttle on gold and precious metal stocks over the next several months. And we’d love to have you join us. You’re probably going to have to put in some work to maximize the profits here. But no one ever said making money is free.
We’re talking about participating in what could easily shape up to be the greatest gold bull market in history. This could truly be a once-in-a-lifetime opportunity for you, your family, your dog, your pet goldfish, that plant you don’t water, etc. The upcoming gold bull market could be life changing. Don’t miss out.
Until next time,
Luke Burgess
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
