High debts makes gold look 40% cheap

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Could Gold Be 40% Undervalued?

 

Gold is a liquidity phenomenon. More liquidity drives the gold price higher. The 2020 liquidity surge helps to explain the strong recent rally in gold bullion. Still greater gains lie ahead, because liquidity must keep expanding. While the US Fed led the latest liquidity stimulus, China (the other key Central Bank) is now following. Ultimately, the future supply of liquidity is determined by the whopping stock of debt. In our view, debt is still too high versus current levels of liquidity and the gold price looks too low compared to strongly rising Global Liquidity. Large debts require more liquidity and more liquidity will drive gold higher. Assuming that balance is restored back to long-run averages, gold bullion needs to rise to around US$2,500/oz., i.e. by some 40%.

 

 

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