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Calm before 'perfect storm'; gold prices to breach all-time high by year-end

Kitco News

The Federal Reserve is on track to continue quantitative easing, with interest rates eventually headed to negative levels in the U.S., said E.B. Tucker, director of Metalla Royalty.

In his new book, book, “Why Gold? Why Now?: The War Against Your Wealth and How to Win It,” Tucker references the Modern Monetary Theory (MMT), which is an economic theory that states that central banks can increase the money supply to achieve full employment without the risks of inflation.

Tucker said that this is in the process of happening now, in steps.

“These things happen in sequence. Right now, you’re hearing this because in the future there will be MMT, but it’s not going to happen right away, it’s going to happen when the government really struggles to finance itself,” Tucker told Kitco News.

The consequence of MMT will be negative interest rates, and higher gold prices, Tucker said.

Tucker said that gold prices are headed to break the all-time high level of $1,900 an ounce by the end of the year.

“People typically don’t prepare. Nobody wants to buy hurricane insurance until after the storm, and after the storm, then everyone wants to buy hurricane insurance and it’s quite expensive after the storm,” he said, alluding to safe haven assets.

On risk assets, optimism continues to run high on stocks, but is getting to the point of being excessive, Tucker said.

“You ask the average person...ask your friends, they think you’re going to get right back on an airplane and go somewhere and life will be back to normal and it’s going to be fine. It’s not going to be fine. There’s going to be an adjustment period,” he said. “Assets are priced as if what we’ve lived through is going to continue. That’s how markets work, they price what just happened. We have to look forward and see what’s going to happen. So this is your chance to re-arrange your position, prior to the next phase of this.”

He noted that traders are still buying Hertz, which has already filed for bankruptcy, in a signal of market irrationality.

Tuckers’ comments as Goldman Sachs recently revised their projections upward for stocks, predicting that the S&P 500 will close the year at 3,000 points in their base case scenario.

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