US asset manager Frank Holmes believes gold prices may rise to $ 4,000 over the next three years if the Fed’s total assets are again a benchmark for gold.
In the course of the last big boom phase in gold up to September 2011, the US Federal Reserve had dramatically expanded its balance sheet. To combat the corona crisis, the Fed has again dropped all inhibitions regarding the purchase of securities and thus the amount of newly printed money. The dimension is unprecedented.
Gold and Fed balance sheet
Frank Holmes, CEO of the U.S. capital manager Global Investors explains:
“If we look back over the next three years, if history repeats itself, from 2008 to 2011, during that three-year period, the price of gold rose from $ 750 to $ 1,900. If we forecast this because we have the same expansion of the Fed’s balance sheet, if the cycles are exactly the same, gold could rise to $ 4,000. ”
And Holmes explains that when Alan Greenspan was Fed President from 1987 to 2006, the Fed’s balance sheet corresponded to about 6 percent of the country’s gross domestic product. Today, it is currently around 33 percent with $ 7 trillion. “And that much money [Fed Chairman Jerome] Powell has to spend on the corona virus and synchronized lockdown of the world.” That’s why he believes physical assets like gold will go up in price.