Gold price will see strongest boom in history after ‘reset’ at this level – Harry Dent
(Kitco News)- Harry Dent, founder of HS Dent, is calling for gold to see its final rally to $2,200 an ounce next year before falling to multi-year lows. After 2022, the new lows should present a new buying opportunity. “From 2022 on, I’d be buying gold hand in fist, it’s going to hold up better than most commodities,” he said.
“I’m expecting gold to go up…when this crisis starts to build next year, it’s going to see more stimulus, it’s going to go up at first. I have a target of $2,200,” Dent said. “$2,200 is the strong resistance in the coming months and then crash back down to its 2015 lows, around $1,000.”
The economy is not going to see inflation next year; on the contrary, major deflationary forces will push both stocks and gold down together, Dent said.
“When deflation sets in like when Lehman Bros. hit in mid-2008, gold suddenly went down 33%, silver 50%, it was not the safe haven in the Great Financial Crisis, it will not be the safe haven in this downturn either, because this downturn is going to see deflation, that’s what’s going to drive gold to $1,000,” he said.
Gold has a strong correlation to inflation and importantly, inflation expectations.
Inflation is unlikely to return to the economy any time soon, Dent added.
“You will never see inflation for a long time. It will come back slowly in the next boom, you’re not going to worry about inflation in a year or two from now. It’s going to disappear,” he said.
Long-term, gold will rebound as inflation returns.
“Long-term, gold will definitely boom with the next commodity cycle. I think the next commodity cycle, overall, with gold being a leader in the precious metals, may be the strongest in history because emerging countries, which are going to be driving this next boom, Asia, Middle East and Africa, consume a lot more commodities as a percentage of their income than they do capital goods,” he said.
Once that happens, forecasts for $5,000 gold become possible, but gold will unlikely see such levels until at least 2038, Dent said.
On the physical demand side, strong demand from Asia will continue to boost gold prices in the long-term.
“Southeast Asia and India are going to drive the next boom and those people are going to be big consumers of gold in addition to all the other commodities,” he said.
During the next two years while gold deflates in value, high quality bonds, like Treasuries and AAA corporate bonds, are expected to outperform, Dent said.
“What I like, and what did well [during] the 1930s Depression, particularly the 1929 to 1932 crash: highest quality bonds,” he said. “I’m predicting in a crash, where stocks are going down 70% to 90% over the next two years, the 30-year, the longest duration U.S. Treasury bond, which is only yielding about 1.5% right now, will go up 30% to 40% in value.”