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$5k gold in next bull run, inflation to ‘tear society apart' if Fed fails - Michael Lee

Kitco News

Gold will reach $5,000 per ounce in the next bull run as inflation rises and the U.S. dollar weakens, according to Michael Lee, Founder of Michael Lee Strategy and a 20-year Wall Street veteran who previously worked as a VP at Morgan Stanley. Lee said that he would add “15 percent in gold” to his portfolio.

“We’re on the cusp of a breakout where gold can go up to $5,000,” he predicted. “I think the dollar is getting near its peak. Once you see that dollar reversal, once gold gets above $2,000, you could really see it start to take off.” He added that, “considering the amount of money we print, I have no idea why gold is not above $4,000 right now,” suggesting gold’s role as an inflation hedge.

The latest headline Consumer Price Index data imply a year-over-year inflation rate of 6.5 percent in December, down from 7.1 percent in November. The Federal Reserve raised rates by 425 basis points last year in an effort to stem high inflation, which reached a peak of 9.1 percent in June.

Lee suggested that if the Fed fails to bring inflation under control, then it would “tear society apart.”

“The Fed is likely to go overboard in their restrictive policy, knowing the dangers of inflation,” he said. “You become a banana republic once your currency becomes worthless.”

Lee spoke with David Lin, Anchor and Producer at Kitco News.

Fed Pivot Unlikely

Those who claim that the Fed will soon pivot from its restrictive policy stance are “smoking crack,” said Lee.

“Before they [The Fed] become accommodative and truly pivot and start cutting, there is a lot that needs to happen,” he said. “If the Fed cuts too early, or they reverse course too early, and we have a double top [in inflation], think of the destruction… think about how little credibility the Federal Reserve as an institution has right now, and how much less they’ll have if that happens.”

He claimed that the Fed will have to “crush demand and cause a recession” to bring inflation down to its 2 percent target, and won’t pay attention to bearish trends in markets.

“The Fed is not going to abandon that 2 percent target because it is hurting the S&P 500,” he claimed. “Gone are the days where the Fed governors are trading their own personal accounts based on the announcements to inflate the S&P 500… the way that the bond market is reading it, I don’t think that we’re going to get this pivot until we have a pretty ugly recession.”

To find out how Lee is positioning his portfolio to withstand a recession, watch the video above

Follow David Lin on Twitter: @davidlin_TV

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