Economist Jim Rickards expects the price of gold to rise above $27,000, stressing that his prediction was not made with interest rates or shocks in mind. “This is the result of careful analysis,” he explained. This represents a significant increase from his previous prediction of US$15,000 by 2026.
Jim Rickards' $27,000 Gold Prediction Explained
Economist Jim Rickards shared his predictions for the price of gold in an article published this week in the Daily Reckoning. Rickards is an American lawyer, economist, investment banker, and consultant on international economic and financial threats. He is also a best-selling author, known for books such as The Currency War, The Death of Money, and The New Case of Money.
"I've said before that gold could reach $15,000 by 2026," Rickards began. "Today I update these predictions," he explained.
My latest prediction is that gold could rise above $27,000. I'm not saying this to get people's attention or shock them. This is not an assumption. This is the result of careful analysis.
"Of course, there is no guarantee that this will be the case. These predictions are based on the best available tools and models, which have proven accurate in many other situations," the economist explained..
Rickards' analysis concerns the non-deflationary price of gold under the new gold standard. Central banks now prefer paper money, which they can control, to gold, which they cannot control. However, Rickards said, "If a combination of excessive money creation, competition from Bitcoin, extreme dollar debt, a new financial crisis, war, or natural disaster destroys confidence in the dominant currency, then there will be no choice." He said there may not be one. In such cases, central banks may return to gold to restore global monetary stability. The analysis also considers the appropriate price of gold to avoid inflation and deflation, and also provides historical examples for achieving balance.
“Clearly the policy goal is to get prices ‘right’ by maintaining the right balance between gold and the dollar. You can either sell gold from federal reserves (troy ounces) or use newly printed Fed money to buy gold on the open market.
Rickards further explained that the US M1 money supply is $17.9 trillion, including cash, bank reserves and demand deposits. He added that assuming 40% gold backing (a standard used historically from 1913 to 1946), $7.2 trillion of gold would be required. The economist continued:
If he applies the $7.2 trillion valuation to 261.5 million troy ounces, the price of gold would be $27,533 per ounce.
"This is the implicit non-deflationary equilibrium price under the new world gold standard. Of course, the money supply has been volatile lately, especially in the United States," he said. "It's debatable. Is 40% support too high or too low? However, my assumption is a conservative one based on financial economics and history. $25,000 per ounce under the new gold standard. As of May 17th, the price of gold was $2,427.40 per ounce.