Since March, the Federal Reserve has made unprecedented moves to bolster the US economy with a soaring economic stimulus package which runs into the trillions of dollars. Having slashed interest rates twice in March, it also embarked on a costly series of loans to banks and other financial institutions, undertook asset purchases including quantitative easing, launched programs such as Paycheck Protection, bought corporate bonds and pledged to buy £476 ($600) million of small business loans, amongst a slew of other measures.
Despite these necessary actions, the Fed itself is in a precarious position, with one industry expert warning its balance sheet is teetering on the edge of devaluation – something that would see gold prices rising exponentially.
If you’re a regular reader, you’ll know that the general consensus amongst economists, banks and industry insiders is that gold will more than likely reach £1,593 ($2,000) an ounce by the end of the year, with some saying £2,392 ($3,000 per ounce and above is also on the horizon.
Myrmikan Capital founder Dan Oliver says that we could be selling the precious metal far short and if/when the assets underpinning the Fed’s balance sheet fail, gold could easily target £8,000 ($10,000). He said, “Any decline in asset values makes the whole system unravel…The Fed, as you know, has been on a massive purchasing spree because of the virus situation, and so therefore the equilibrium price of gold is going up commensurately, and so the numbers now to balance that balance sheet are enormously high. My [forecast for gold prices] has changed. I’m at £8,000 $10,000 now.
“When you project a crash in the value of the other asserts of the Fed, i.e. the mortgage bonds that they own, the Treasury bonds that the own, all these new funky commercial debt that they’re buying, some of it sub-investment grade, when those things crash the Fed will find its assets completely stripped of value…and that will have a big impact on the dollar and the price of gold.”