Economic Panel Sees Potential For Gold, ‘Helicopter Money’ Coming Soon
Monday August 22, 2016 09:59
(Kitco News) - It’s only a matter of time before central banks take the next unprecedented step and issue helicopter money, and this stimulus will be a positive factor for gold, this according to some market players.
The potential for more accommodative policies from central banks was one of the main topics of Incrementum’s tenth annual advisory board discussion, which included bestselling author Jim Rickards; trader and technical analyst Heinz Blasnik; economist Frank Shostak; former investment manager Zac Bharucha; and, and Santiago Capital CEO Brent Jonhnson.
Kicking off the discussion, Rickards said he expects central banks to crank up the printing press by 2017. He added that the main question is: what will this helicopter money look like? Will it be money given directly to consumers or to the government, who will spend it on infrastructure development, he asked.
Johnson said that he is also expecting to see renewed central bank spending and while it will create short-term growth, it is not fixing the underlying global economic problems.
He added that continued money printing will “just lead to more excesses, to more misallocation of capital and sooner or later, you get the big debt knockout.”
Blasnik noted that the problem with an expanded quantitative easing program, either supporting infrastructure growth or money sent directly to consumers, is that governments can’t create wealth or prosperity.
“That is the basic problem – there ain’t no free lunch. And that is what helicopter money implies: It implies that there is a kind of free lunch somewhere, but there isn’t,” he said.
In this environment, the analysts are optimistic on gold, even if the market does face some hurdles in the near term.
Blasnik said that he is expecting to see a correction in gold during the second half of the year; however, he added that it would be a good opportunity to jump back into the market.
“I wouldn’t chase [gold and gold-mining stocks] now, but I think there’s going to be a good opportunity during the second half.”
Johnson agreed that investors shouldn’t chase the gold market at these current levels.
“I think we will get the chance to buy them at a lower price sometime in the next 3-4 months. And even if you don’t get the chance to buy them at a lower rate in the next few months, you might be able to buy them with a lot more certainty,” he said.
Although Shostak said his economic models are still bullish on equity markets, he noted that investors should exercise some caution because stock markets are “really going crazy.”
“I think it’s reasonable holding that core gold position and looking for tactical opportunities. I think there’s probably going to be a kind of crunch again in the markets, I think the sentiment is very fragile,” he said.
Although gold is struggling to hold onto recent gains, stuck in a tight trading range for the last two weeks, Rickards said that he thinks it is only a matter of time before markets move higher.
“I would make the point that we are not near the top, it’s quite close to the beginning - so I’m very bullish on that sector,” he said.