Gold Above $2,000 by 2020

Release Date: 
Friday, August 14, 2015

Gold and Silver Prices

Gold moved above the critical $1100 threshold this week fueled by China’s devaluation of its currency in an effort to bolster its economy.

“Gold edged up on Friday as the dollar softened and investors weighed the impact of China's currency intervention on the timing for the first U.S. interest rate increase in nearly a decade. Bullion was set to end a seven-week losing streak after China's yuan devaluation earlier this week increased uncertainty over the global economy, and pushed investors into assets perceived as safer such as gold.” (“Gold edges up, set to snap 7-week losing streak,” Reuters, 8/14/15.)

Gold finished the week up $19.90, closing at $1,114.70. Silver prices closed the week at $15.35, up $1.25.

Gold Above $2,000 by 2020 – Beaty

Ross Beaty, an expert in the international mining industry and founder of the private equity firm Lumina Capital Limited Partnership, sees gold returning to its record high no later than 2020.

“Regular readers know that gold has been struggling…But legendary resource investor Ross Beaty likes gold at today’s prices… If you don’t know the name, Beaty is one of the most successful resource entrepreneurs of the last 25 years…

“In a recent interview, Beaty explained why he’s buying gold: ‘Why do I like gold? Partly because I’m a contrarian and nobody else likes it now, always a great bottom indicator. I like it because it’s money and has always maintained its value over millennia, and partly because its supply fundamentals are pretty good right now. Partly because it’s a kind of refuge in the storm that’s blowing around the world financial markets today with unprecedented moves in currencies and energy prices, geopolitical events, religious events, environmental events and on and on… I expect gold will trade over $2000 an ounce by 2020 at the latest….’” (“This Legendary Investor Says Gold Will Soar by at Least 81%,” Casey Research, 8/10/15.)

Forbes: Now is the Best Time to Buy Gold

Forbes contributor and former gold bear Henry To advised investors that today’s low gold prices offer a great buying opportunity.

“After being bearish on gold prices during 2013 and 2014, I became mildly bullish on the precious metal in February of this year. With gold at $1,200 an ounce, I wrote an article discussing three reasons why I believed gold prices would bottom in 2015, and thus why I believe gold was an attractive long-term investment.

“With gold’s recent decline to below $1,100 an ounce, I believe today is one of the best times to own gold. My three reasons for buying gold that I discussed in February have remained valid. I now want to reiterate and refresh my three reasons for owning gold at today’s prices.

  1. Global gold mining production to decline over the next several years… I expect annual global mining production to decline by 7%-10% over the next several years, which in turn will support gold prices.
  2. Global monetary policy outlook is still highly uncertain, despite a stronger U.S. dollar… While the U.S. dollar is strong today, I believe a diversification of the world’s central bank reserves into the yuan (even just a 10% allocation) will in all likelihood result in a weakening of the U.S. dollar, which will in turn increase the attractiveness of gold as an investment or diversification tool for U.S. investors.
  3. Chinese and Indian gold demand will rebound… With gold prices now solidly below $1,200 an ounce, I expect Indian gold demand to pick up substantially over the next several quarters… With the recent devaluation in the Chinese yuan, I also expect Chinese investment demand for gold to pick up over the next several years as Chinese citizens strive to protect themselves from a more volatile currency.

“I thus believe gold is now a solid, long-term investment.” (“Why Now Is A Great Time To Buy Gold,” Forbes, 8/14/15.)

Gold is a Key Resource Asset: Holmes

Frank Holmes, CEO of U.S. Global Investors, explained that the central banks’ continued acquisition of gold demonstrate the yellow metal’s value as a “key resource asset.”

“[I]sn’t it funny that the Federal Reserve doesn’t keep other countries’ currencies, but it continues to hold gold—and in larger amounts than any other central bank? “China and Russia have two of the biggest gold reserves in the world—and have added to them recently—but they don’t come close to the Fed’s holdings, even when combined. What’s more, the U.S. Treasury’s Office of the Comptroller of the Currency just classified gold as money by placing gold futures in the foreign exchange derivatives classification.

“Indeed, central banks all over the world continue to add to their gold reserves. If the metal were as valueless as a pet rock, as one Wall Street Journal op-ed recently claimed, why would they bother to do this? A few weeks ago, China disclosed  the amount of gold its central bank holds for the first time in six years… We believe the People’s Bank of China’s confirmation of its revised gold holdings is supportive for the gold market. It reiterates how China, along with other central banks, views gold as a key resource asset as it continues to seek diversification away from the U.S. dollar. As I’ve said before, China is the 800-pound commodities gorilla… Gold is a long-term investment with long-standing tradition. This remains true even now that prices have declined.” (“Gold Holds Its Own Against These Media Darlings,” Kitco, 8/11/15; original emphasis.)

Iran Nuclear Deal May Threaten Dollar Status as World Reserve Currency

The Obama Administration is warning the U.S. dollar may be dethroned as the world’s reserve currency if the Iranian nuclear agreement is rejected.

“U.S. officials rarely muse publicly about threats to the dollar’s elite global status. But the Obama administration is invoking that concern in a novel way in urging Congress not to block its nuclear agreement with Iran. In recent days, President Barack Obama and Secretary of State John Kerry warned that walking away from the deal between Iran and six world powers and reimposing sanctions would create financial complications that would diminish the dollar’s status as an international reserve currency…

“Attempting to reinstate such sanctions on Russia, China or Western allies that negotiated with the U.S. ‘is a recipe very quickly…for the American dollar to cease to be the reserve currency of the world, which is already bubbling out there,’ Mr. Kerry said Tuesday in New York… The U.S. would ‘risk harm to our economy were we to attempt to sanction some of the world’s largest banks and economies in a bid to force them to our will,’ said a Treasury spokeswoman on Thursday.” (“U.S. Officials Invoke Threat to Dollar in Pitching Iran Deal,” WSJ, 8/14/15.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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