If history repeats itself, the rapid expansion of the balance sheets of central banks will lead to massive inflation of asset and consumer prices, and investors will be rushing to precious metals for protection, said Florian Grummes, managing director of Midas Touch Consulting.
“In the Weimar Republic, hyperinflation set in two years after the start of this balance sheet expansions, so this is the process and it takes time,” Grummes told Kitco News.
The process has already begun, Grummes noted.
What you can see now already in certain parts of the financial markets, especially precious metals and also the big tech stocks, they went bananas over the last few months. Many of those stocks are up triple digit numbers, and at the same time, the real economy is not in good shape,” he said.
The money velocity is seeing historic lows due to the lockdowns from this year, Grummes said. Importantly, it is unlikely that the money supply side of the equation will come back down.
“No, the money supply cannot come down because if they stop expanding the balance sheet we will have civil war and crazy things happening immediately,” he said.
On gold prices, Grummes said that the metal should see new all-time highs by next year.
“We are pulling back a little bit, consolidating, I guess that in the next year we’re going to see new all-time highs. If gold takes $2,075, we’ll probably run quickly towards $2,500. From there, it’s not far to $3,000. That’s likely, possible in the next year, maybe, and then in two, three years, yes, $3,000, $4,000 should be easily possible,” he said.
On the best performing asset this year, Grummes maintains that it will be bitcoin.
“While we’ve been experiencing quantitative easing in the fiat money systems in the last 20 years like crazy, bitcoin, this year, went through quantitative hardening through halving. People need to understand the new phenomenon which is digital scarcity,” he said.
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