American economist and professor of applied economics, Steve Hanke, discussed U.S. monetary policies and their implications for the gold market in a recent episode of The David Lin Report recorded on September 19.
The discussion primarily revolved around recent projections by Goldman Sachs, which saw the precious metal on its way toward a $5,000 price target if the Fed loses its independence and the inflation accordingly spirals out of control.
In response to the bank’s analysis reported by Bloomberg, Hanke suggested a different approach, observing growth in U.S. disposable income as a sure sign of a secular bull market and predicting gold is likely to go even higher, trading at $6,000 by the end of the cycle.
“It’s a much more straightforward methodology that’s worked in the past, and that is to look at what we anticipate the next peak will be in the gold price based on the last gold price peak. So, if you look at the gold market that we’re in now — and it is in a secular bull, and I’ve been bullish on it almost since day one — I think a peak in this secular bull will probably come in around $6,000,” said the economist.
‘$6,000: What more do you want?’
Gold continues to trade with notable resilience, recently breaking out of a long symmetrical triangle, where higher lows signaled steady buying pressure. The breakout unleashed a wave of momentum, likely driven by shifting macro dynamics.
In response to a question about the projected price’s impact on the U.S. dollar during inflation, Hanke once again made it clear that such scenarios do not come into play in his calculations.
The economist dismissed the idea that “a major economic shock” and “apocalyptic scenarios” are necessary to keep gold going forward. Instead, he once again singled out disposable income and historical patterns as enough to back his prognosis up.
“This gets out in the weeds on all kinds of assumptions you have to make and so forth. I think the key thing is we’re talking about the gold market for God’s sake. And where is gold? Is the gold market in a bull market? Yes, it is. Will a bull continue? Yes, it will. Where will it probably end up peeking out at? $6,000 now. What more do you want for God’s sake?”
Hanke also made it clear that his projections and those of Goldman Sachs are roughly in the same ballpark. The $5,000 price target is merely the result of the bank’s own data and the assumptions it made in the analysis, implying the target range might very well prove justified in case of, for instance, the dollar collapsing.
Conversely, the $6,000 target is the professor’s own estimate based on a different set of parameters, namely historical trends such as the 2022 bull run and the current state of the cycle.
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