Financial analyst and investment banker Jim Rickards proposes an intriguing possibility: gold soaring to $27,000 per ounce by 2026. While this figure may sound improbable, Rickards argues it’s not merely a sensational claim but the outcome of thorough analysis.
Gold has experienced a notable rally in recent months, reaching a new all-time high of over $2,400 an ounce. Despite the elevated prices, demand for gold remains robust, with central banks worldwide and investors, particularly in Eastern markets, adding to their reserves.
Rickards’ projection hinges on the consideration of gold’s price under a hypothetical monetary gold standard. While such a standard is not currently favored by policymakers, Rickards raises the question of what might occur if confidence in fiat currencies were to erode due to factors such as excessive money creation, competition from cryptocurrencies like Bitcoin, heightened levels of dollar-denominated debt, financial crises, geopolitical tensions, or natural disasters.
In this scenario, central banks might be compelled to revert to a gold-backed system to restore stability to the global monetary framework. Rickards emphasizes that this isn’t a far-fetched notion, given historical precedents and discussions within certain circles, such as the BRICS bloc.
To ascertain the potential price of gold in such a system, Rickards adopts a method based on maintaining an equilibrium between the dollar and gold. Using the M1 money supply as a starting point and assuming a 40% gold backing for currency, he calculates the equilibrium price to be $27,533 per ounce.
While Rickards’ prediction may seem ambitious, it prompts reflection on the resilience of gold as a monetary asset and the potential ramifications of shifts in global economic dynamics.
