24K99 News According to Jared Dillian (Jared Dillian), editor-in-chief of “No Confidence” and editor of “Daily Dirtnap,” commodities tend to peak after major geopolitical events, but don't ignore the 10% fluctuation in any direction that gold may occur, because the market has the highest probability of “melting” since 1980.
Between March 1 and April 12, the price of gold rose 18%, or about $400, to a new record high. This was mainly driven by factors such as escalating tension in the Middle East, record central bank purchases, ongoing concerns about inflation, surging US government debt, and continued depreciation of fiat currencies.
Following this rally, major banks have raised their gold price forecasts. Citigroup now predicts that the price of gold will reach 3,000 US dollars within 6 to 18 months. Goldman Sachs expects gold to reach 2,700 US dollars by the end of the year, and UBS has raised its year-end target to 2,500 US dollars per ounce.
At the time of writing, spot gold has fallen from its all-time high and is trading steadily above $2,330 an ounce, which is now reported at $2337.53.
(Spot gold chart, source: FX168)
Dillian said that the bank's goal of raising the price of gold is somewhat worrying in terms of sentiment, and he expects the trend to dry up in the short term.
“Gold will reach its peak, and this will happen at some point at $2,500,” Dillian said. “I'm concerned about the mood, and the mood is getting a little hot all the time. Gold people, myself included, are even more bullish, and I think you'll see bullish sentiment dry up in the short term, followed by a price correction.”
Dillian, who holds 40% of the gold position, continues to hold his position, but plans to hedge it. “I expect an adjustment of around 10%,” he said.
Gold's parabolic motion?
Dillian compared the potential future price trend of gold to the price of cocoa. He pointed out that since gold faced the highest possibility of melting since 1980, a parabolic movement similar to this precious metal is possible.
Cocoa prices have risen from $2,000 at the end of 2022 to over $10,000 this year. “What if gold had reached the level of cocoa? For Coco, this is also a technological breakthrough. The fundamentals are also changing, but it's broken from its 47-year foundation. “The longer it takes to integrate, the more impulsive the movement, and the longer it lasts,” he said. “After 13 years of consolidation, gold has only been rising for a month.”
The sharp rise in cocoa prices this year is due in part to a supply deficit — poor harvests in West Africa, which is the main region for global cocoa bean production. The El Niño climate phenomenon also caused dry weather in Ghana and Ivory Coast, the two largest producers of cocoa beans in the world.
Dillian believes that the fundamentals of gold are as strong as cocoa. However, when it comes to gold, he is particularly concerned about the alarmingly high level of US debt.
“The US government spends $1.1 trillion on interest payments every year. If you go back to 2019, it's only $300 billion a year. We'll reach a point where interest payments will take up a significant portion of the budget,” he said.
This would cause the Federal Reserve to adopt yield curve control and directly monetize debt.
Dillian explained, “We rely on low interest rates to finance the government. If interest rates rise more than they are now, then we will become a functionally bankrupt country. At this point, the federal government will put political pressure on the Federal Reserve to fix the entire yield curve. This has happened before — in the 1930s and '40s, we fixed our 30-year bonds at 2%.”
Dillian added that the Federal Reserve will continue to print an unlimited amount of money to buy unlimited amounts of bonds at specific points on the yield curve.
“This is how gold achieves that kind of parabolic motion. I don't think this will happen right away. This won't happen in 2024, but I think it will happen within the next presidential cycle — sometime between 2024 and 2028,” he pointed out.
“Gold will outperform Bitcoin in a geopolitical turbulent year”
Dillian believes that in a year full of geopolitical uncertainty, gold will be superior to Bitcoin because he doesn't see Bitcoin as a true store of value.
“If we're in a time of geopolitical turmoil, then gold should be far superior to Bitcoin. “If we look at Bitcoin, it hasn't played a role as a safe haven asset in recent Iran-Israel news,” he said. “I don't think Bitcoin is a store of value.”