Op-ed views and opinions expressed are solely those of the author.
Gold reached a new high per ounce in 2020. The reasons the precious metal surged to new strength are many, but certainly, one factor stands out: The federal government is simply spending too much money.
The last time our government showed true fiscal restraint was in the mid-1990s. Democratic control of the White House, and conservative Republican control of Congress, led to divided government with the people demanding an end to the era of massive government spending. The American people had it right. Putting the government in the hands of one party tends to push policies to the extremes. The Democrats control all of Washington now and are pushing a second COVID stimulus said to cost about $1.9 trillion. Adding this to the $2.2 trillion the government spent just a year ago on stimulus spending brings us to a mind-boggling $4.1 trillion — in just one year. Yet millions remain unemployed as the effects of the pandemic lockdowns continue to impact the national and world economies.
Washington is not spending enough time discussing the consequences of this spending spree. Among those consequences will almost certainly be the devaluation of the dollar. Consumers will see this in the form of inflation. They will pay more for the foods they eat, the fuel they use, and the things they want to buy. The question for consumers and investors is, where is it safest to invest to preserve and grow value over the next one to two years? What investment will provide stability plus opportunity?
As the CEO of Inca One Gold (OTC: INCAF), I have seen the volatility of cryptocurrencies and the damage done to the dollar while gold has held and increased its value. Social media posts can push cryptocurrencies beyond realistic values. But 2020 was a solid year for gold. While it made headlines for reaching a record high in July 2020, it quietly and steadily grew in value across the year. Forecasts indicate it may grow anywhere from 11% to more than 20% in 2021.
The reasons for gold’s potential in the near term get back to the economy’s fundamental weaknesses and the effects government policies are likely to have on the value of the world’s reserve currency, the dollar. Simply put, one-party government in the current climate is leading to excessive spending and an inattention to establishing policies that foster the creation and growth of good jobs.
A recent Forbes analysis by Goldman Sachs found that “if inflation rises but interest rates stay low, the real cost of borrowing will fall further into negative territory, so making gold more attractive to investors. Gold yields no interest or dividends. But if bonds pay interest that doesn’t even keep up with inflation, bullion looks increasingly attractive. Gold has a history of maintaining its purchasing power over long periods.” Goldman’s forecast is bullish. Many forecasters agree that the weakening recovery and easy money policies make gold, along with silver and other metals and commodities, more attractive across 2021.
Citibank is among the gold bulls. In the bank’s latest gold forecast, the bank sees gold rising to $2,200 per ounce in three months and to $2,400 per ounce in six to 12 months. “We lift the 2021E base case gold price forecast by $300 per ounce, versus our early July update, to a record $2,275 per ounce.”
I am bullish on gold in the coming year. Unlike many other precious metals and elements, gold comes from many stable sources around the world. Inca One Gold operates in Peru, a stable country that is becoming a world power in gold mining. Gold has many key uses in the products we use every day. Gold is one of the most fundamentally useful metals in the modern economy. Its value is intrinsic. Corporations, governments, and even countries may come and go, but gold will never lose its usefulness and therefore its value. In 2021, gold should play a key role in every serious investor’s portfolio.