Unless you are a mind reader, no one knows for certain what the future holds. However the best predictor of the future is the past and the present.
In this study, we’ll examine historical factors that have led to rapid increases in the gold spot price and look at how similar events are all occurring in the year 2022.
A look at the evidence regarding the gold spot price suggests that it is quite likely that the gold spot price will reach $2,500 in the year 2022 despite a long history of the gold spot price being manipulated downward. That would only be about a 35% increase to today’s spot price of 1840. After watching this video, you will see that a 35% increase in the spot price this year is quite possible.
This study will identify the types of events that have led to rapid rises in the gold spot price and show how 10 of these events are happening concurrently in the year 2022.
Geopolitical factors have often led to rapid increases in the gold spot price.
As a consequence of The 1973 Oil Crisis, Gold shot up 73.49% over the course of 1973. Gold went from $64.10 at the close of 1972 to $112.25 at the close of 1973.
The 1973 Oil Crisis began in October 1973 when the members of the Organization of Petroleum Exporting Countries, led by Saudi Arabia, proclaimed an oil embargo against nations that supported Israel during the Yom Kippur War. The first nations that were targeted were Canada, Japan, the Netherlands, the United Kingdom and the United States.
In the midst of the embargo, oil prices shot up 300%. This affected other areas of the U.S. economy, forcing inflation up to 6% in 1973 and over 11% in 1974. A war on the other side of the world profoundly impacted all areas of life in the United States.
Gold closed at $187.50 in 1974, after rising nearly 300% in 24 months.
The 1979 Oil Crisis had a similar effect on the gold spot price. This crisis began when political instability in Iran slowed down the global supply of oil. Although the global oil supply only decreased by 4 percent, the oil producers raised crude oil prices. Oil prices doubled in 12 months to over $39. The rise in oil prices affects all areas of the global economy and the inflation rate in the US went to 11.25% in 1979, which had been the highest rate since 1974.
Between May of 1979 and December of 1979 the gold spot price rose over 100% from $243.70 an ounce to $524 per ounce. If one event can push gold up by 100% in 8 months, imagine how a storm of multiple events in multiple areas might affect gold prices, especially with gold being the world’s most popular safe haven.
Financial bubbles have also tended to cause rapid increases in the spot price of gold.
A bubble is when an asset has a rapid increase in the price without a corresponding increase in the intrinsic value of the asset. The expansion of the bubble can stem from a number of different factors like the sheep mentality similar to what we have seen with Bitcoin or deregulation in a previously regulated area.
One of the most impactful bubble collapses was the 2008 Financial Crisis that started in the US and reverberated throughout the world.
From January 1, 2007 to January 1, 2011, the spot price of gold rose 226% from $696.43 to $1,573.16.
Predatory lending, risky investments by global financial institutions, and the bursting of the United States housing bubble all combined to create an epic financial collapse.
In the year 2006, over 17% of home purchases were subprime loans or no-documentation loans. By early 2007 the writing was already on the wall. Lenders noticed an increase in delinquency rates. Also in 2007, Former Federal Reserve Chair Alan Greenspan predicted a recession.
Throughout the years there were indications that a storm was brewing and during that time smart investors sought refuge in gold. For the year 2005 gold increased 17% to $513, gold went up another 24% to $635 for the year 2006, and gold moved 32% for the year of 2007 to $836.
By 2009 the effects of the housing bubble being popped was being felt around the world. The word was out that we were in a global financial collapse.
For the year 2009 gold jumped 28% to $1,104. It jumped another 28% for the year 2010 reaching $1,410.
Globally over $2 trillion dollars were lost in the ordeal. The only bright spot was gold. From January 1, 2007 to January 1, 2011, the spot price of gold rose 226% from $696.43 to $1,573.16.
In recent years, there have been indications that a 35% increase in the spot price is quite possible. In 2019 the news of the negative yield curve along with instability in Afghanistan pushed gold up 18%. The pandemic and all that came with it pushed gold up 25% for the year of 2020.
History proves that a 35% increase in the spot price can happen fast and it only takes one occurrence anywhere in the world.
The year 2022 is unlike previous years because there are seemingly an infinite number of events this year that could push the gold price up by 35% all on their own!
Here are 10 of those events.
#1 Record Inflation With No End In Sight
The inflation rate continues to increase. For May 2022 the inflation rate reached 8.6%. For the month of March 2022 the inflation rate was at 8.5%. That March rate was the highest 1 year increase since December of 1981. The inflation rate slowed down just a bit to 8.3% for April 2022. Although this down from the 41-year high of 8.5% in March 2022, it was still far less than Federal Reserve’s forecast of 8.1%. The annual rate of inflation rate for the world also continues to increase. Based on consumer price index (CPI), global inflation accelerated to 9.2 % in March 2022, up from 7.5% in February 2022 and 6.8% in January 2022. The consumer price index as produced by the Bureau of Labor Statistics is notoriously low, relative to the daily experience of most Americans. The gas pump and the grocery store both tell us that the cost of living is up more that 8.6% from this time last year, which is the claim of the Bureau of Labor Statistics.
What makes this a thousand times worse is that wages are lagging far behind inflation. Wages are up 5-6% from this time last year however both the listed inflation rate and the true inflation rate are far beyond that wage increase. Momentive Workforce Survey conducted a study in May 2022. According to their study, 66% of Americans say that inflation has outpaced any gains that they have made in salary over the past 12 months. This particular weakness in the US economy will be a part of the concurrent misfortunes that will force investors into gold and silver and a refuge.
#2 The Highest Public and Private Debt In US History
By the end of April 2022, the public debt of the U.S. was around $30.44 trillion. Over 40% of US dollars in circulation have been created from thin air over the course of the past 24 months. Money printing is a tool that governments have overused, especially since the USA did away with the gold standard in 1971. Every day that goes by, money printing becomes a less viable option because the debt results in less confidence in the dollar. Further, consumer debt is also through the roof.
According to the Federal Reserve, consumer debt levels for March 2022 climbed by $52.4 billion, an annual increase of 14%, seasonally adjusted. Revolving credit, which includes credit cards, was up by 21.4% from March 2021. This is a bad sign for our economy, especially in the face of higher interest rates.
Unfortunately this is a factor will combine with the others to collapse our economy and consequently push gold over $2,500 per ounce this year.
#3 The Hyper-Inflated Stock Market
The 3rd factor that will result in skyrocketing gold prices this year is the hyper-inflated stock market.
The poorly performing US stock market is highly inflated and there is no indication that it will recover anytime soon. This is reflected in the horrendous 2022 performance of the S & P 500 index. The S&P 500 index measures the value of the stocks of the 500 largest corporations by market capitalization listed on the New York Stock Exchange or Nasdaq. Right now the price to earnings ratio for the S & P 500 is the worse that it has ever been in the entire modern era of history. The P/E ratio gives an indication of how long it would take for an investor to earn back their entire investment. The average for the S & P 500 10-year price to earnings ratio has been 19.6. As of June 3, 2022 the current S & P 500 10-year P/E ratio is 31.1. With a standard deviation of 1.4, this suggests that current investors will need to wait 40% longer than the historical average to recoup their investment.
This is bad news for those of us that have our entire retirement tied up into mutual fund and 401Ks.
This will be a part of the crap storm that will send the dollar spiraling backwards and gold shooting forward by at least 25% this year.
#4 Supply Chain Issues
The supply chain issue will exacerbate several of the other events on this list, especially inflation and social unrest.
The Russia/Ukraine conflict has severed key supply lines for wheat, nickel, aluminum, platinum, and sunflower oil. There are a number of countries in the Middle East and Africa that rely on foodstuffs from the Ukraine.
Strict Covid protocols and the Ukraine conflict have combined to slow down China’s production and to restrict their distribution channels.
The supply chain issue is a big part of the reason why world food prices are skyrocketing. The United Nations Food Index reports that world food prices are up 29.8% in April 2022 compared to one year ago.
The supply chain issue does not show signs of going away or even getting better for that matter. This will contribute to the record collapse that will send folks running to gold with the last few dollars that they have left.
#5 The Negative Yield Curve
Inverted yield curves occur when short term US Treasury bonds have a higher yield than the long term bonds. Historically, an inverted yield curve is a reliable indicator of a coming recession. It is largely a reflection of declining investor confidence. When consumer confidence in securities decline, it usually leads to higher gold prices.
For example, in May of 2019 the yield of the 3-month US Treasury bond became higher than the 10-year bond on May 23, 2019 and except for one day in July it remained inverted over 4 months until October 10th of 2019. This began a bull run in gold, which I would argue, we are still in today. Within that timeframe, gold jumped over 14% from $1280 to $1490.
According to Bespoke Economics, when there is a negative yield curve, “there has been a better than two-thirds chance of a recession at some point in the next year and a greater than 98% chance of a recession at some point in the next two years.”
Unfortunately for mainstream investors, the yield curve inverted March 31, 2022 US. At one point the yield on the 10-year Treasury fell to 2.331%, while the yield on the 2-year Treasury was at 2.337%. That is right. We have had a negative yield curve in 2022.
The 2022 negative yield curve suggests an impending financial collapse, which will likely be sped up by the all of the debilitating issues that our country is facing. Inevitably, these factors will cause a huge spike in the gold price in 2022.
If you are still not convinced that one of the greatest financial collapses in history will occur in 2022 that will cause gold to reach $2,500, we have 5 reasons factors that will help to send panic throughout the US and push up the gold price.
#6 An Increase In Violence Throughout America
Violent crime in the US rose 5% from 2019 to 2020 and it has shown no signs of regression.
As reported by the Gun Violence Archive, excluding suicides, 19,515 people in the U.S. died in gun violence-related incidents in 2020. That number increased to 20,923 for the year 2021.
Additionally, an increase in mass shootings in the United States is adding to the hysteria. According to the Gun Violence Archive, the number of mass shootings grew from 610 in 2020 to 692 in 2021.
In a June 7, 2022 report called, “Summary of Terrorism Threat to the United States”, Homeland Security cited “recent violent attacks by lone offenders against minority communities, schools, houses of worship, and mass transit” as an “evolving threat”.
In 2022, 53% percent of Americans say that they worry about crime a “great deal”, which the highest level since 2016.
There is no evidence that gun violence will be declining in the US any time soon. This reality will contribute to the hysteria and instability that will send Americans to gold and a safe haven.
#7 An Increased Number of Home Evictions
Eviction filings are hitting new highs throughout the United States. With the end of the moratorium that was mandated in the midst of the Covid crisis, overdue homebuyers and renters are left with no legal leg to stand on.
Three cities in Texas – Dallas, San Antonio, and Houston – are experiencing an increase in filings from landlords looking to force out renters.
In January 2020, Harris County, which encompasses Houston, had 6,351 evictions filed. The cases dropped significantly during the CDC’s moratorium on evictions in September 2020. But months after it was lifted in August 26, 2021, eviction filings picked up to more than 6,800 cases, surpassing the number of cases filed before the pandemic.
The Center for Disease Control and lenders like Freddie Mac have done their best to prevent the inevitable, however all the evidence suggests that we can expect more Americans to lose their dwelling and for many this well result in the loss of a hefty investment.
This reality will have a snowball effect and will contribute to heightening anxiety, insecurity, and anger.
This will help to create the environment that will result in a new all-time high for gold this year.
#8 Rising Interest Rates
The Federal Reserve, which is the Unites States’ central bank, raised interest rates by ½ percentage point on May 4, 2022. This was the highest rate hike in over 20 years. At one point they were likely to raise rates by ½ percentage point at every Fed meeting this year. Out of desperation, the Federal Reserve raised interest .75%, which is the steeped hike since 1994.
This will dry up access to capital for both the consumer sector and the commercial sector, both of which have become dependent on stimulus. Credit will become more expensive to consumers at a time when a record number of Americans have overextended credit lines. Mortgage rates will go up just as we are seeing more adjustable rate mortgage loans.
Higher rates also mean that the commercial sector will have fewer dollars to invest in their businesses. This will result in an unfortunate trickle-down effect that will likely result in layoffs. In 1981 The Fed raised interest rates to rein in inflation and what resulted was an 11% unemployment rate, which was the highest unemployment rate since The Great Depression.
Rate hikes is just one more factor that will contribute to the market collapse, housing crisis, and social unrest that will have investors rushing into gold and silver.
#9 The Ukraine/Russia War
The Ukraine Russia War has had a ripple effect on the entire global economy.
US sanctions on Russia began in February 2022 after the conflict in Ukraine began. These sanctions included a U.S. ban on Russian oil imports. Russia is the world’s second largest exporter of oil and gas. Russia has shifted its exports away from the US and Europe to India and Asia, enabling them to acquire cargoes at a steep discount.
This war and the White House’s responses have helped to drive up the price of West Texas crude oil from $76.08 to $120.67, which is over 60% year to date.
In the midst of this, The White House has provided over $54 billion dollars to the Ukraine in “humanitarian aid” so far this year, with over 20% of this aid going to weapons. No one can say that the Biden presidency has not done its part to inflate the “Everything Bubble”!
Furthermore, US aid to Ukraine has also stoked the flames of some very bad blood between the Kremlin and the White House. On August 25, 2022 Russia’s Foreign Minister Sergey Lavrov publicly stated that the West is de facto engaged in a “proxy war” that could lead to World War III. He added that NATO shipments into Ukraine would be viewed as “legitimate targets” by Russia’s military.
Again, oil prices are already up 60% year to date and we are only in early June! This is so reminiscent of the 1979 Oil Crisis where the price of oil jumped over 100% that year. That year gold responded by also jumping over 100%.
A 35% increase in the spot price of gold over the next 6 months is just about a certainty.
#10 The Weaponization of the Dollar
The US dollar has served as the world reserve currency since the Bretton Woods meeting in 1944. According to the IMF over 59% of the world’s reserves are held in dollars as of March 2022.
On February 21, 2022, in response to Putin going into Ukraine, the Biden administration issued Executive Order 14065 that stopped new US investment in, US exports to, or US imports from Russia.
It has been reported that sanctions have tied of up 2/3 of Russia’s reserve.
According to a June 3, 2022 White House briefing, “the Russian economy is staggering under the weight of financial and trade sanctions, export controls, and the exodus of approximately 1,000 U.S. and multinational businesses.”
Several countries have taken exception the weaponization of the dollar.
Yu Yongding, a leading economist at the Chinese Academy of Social Sciences, said in a speech last week that sanctions had “fundamentally undermined national credibility in the international monetary system”. He added, “What contracts and agreements can’t be dishonoured in international financial activities if foreign central banks’ assets can be frozen?”
China and India have maintained efforts to establish an efficient payment system with Russia. Other countries, including South Africa, Brazil, and Mexico have vowed to remain neutral and maintain trade with Russia.
The weaponization of the dollar is one more factor that makes the use of the dollar less normative throughout the global economy and forces many emerging countries to conduct their transactions in currencies other than the dollar.
This will be one more factor that will create a burden that will weaken the dollar this year and force up the price of the world’s number 1 safe haven –
GOLD!
Historically it has taken only 1 event to push gold up in a short period of time.
Combined with all other attributing factors, it is quite likely that gold will jump 35% to reach $2,500 this year alone.
However, even if it does not make the leap to $2,500 in the remainder of this year, gold investors will still make out very well.
If gold jumps by 10% and closes at $2,046 for the year, it will still have done its job by outdistancing the single digit inflation that Bureau of Labor Statistics is reporting.
If gold jumps 20% this year and closes at $2,232, it will have offset the true inflation rate, which is closer to 18%.
To all the upstanding people of the United States, it is time to protect your hard-earned savings.
Strengthen your position in gold in gold before the price goes to the moon this year.
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