Kitco News reported that Mr. Brien Lundin, editor of the Gold Newsletter and CEO of the New Orleans Investment Conference, warned that the US Federal Reserve's money management will cause the next crisis and force the US Central Bank to accept zero or even negative interest rates.
“The Fed’s money management will create the next crisis and when that happens, they will be forced to go back to zero interest rates,” Lundin told Kitco News.
Lundin noted that the Fed's decision to cut interest rates by 25 basis points last week, following a 50 basis point cut in September, is just the beginning of a longer cycle of rate cuts due to the unsustainable cost of servicing the national debt.
“There will be a succession of rate cuts in the coming months,” he said. “Companies are having trouble paying and servicing debt in a zero-interest-rate environment. They will find it nearly impossible to service debt at current rates. The Fed really has to lower rates. The longer they wait, the more likely they are to do so at some point.”
The US economy may even need negative interest rates to deal with the next crisis, Lundin said. "My long-term view is that we have to have negative real interest rates with such a high debt burden. The cost of servicing the debt needs to be lower than the rate of depreciation of the currency," Lundin said.
Lundin predicts gold prices will reach between $6,000 and $8,000 an ounce in this market cycle, based on his calculations of past historical trading patterns.
He also explained gold's latest decoupling from the precious metal's traditional inverse relationship with the US dollar and bond yields.
Although gold has hit a new record high, many other experts still believe that gold prices are likely to continue to rise.
"I believe gold will continue to rise because of the extremely high deficit and debt in the United States," Doug Carey, founder and president of WealthTrace, told CBS News. "Many investors believe that high debt in the United States will lead to the Fed creating more money, which is inflation. As paper money continues to lose value, gold will maintain its value."
Harry Barker, founder of De Pointe Research, agrees that gold prices will continue to rise but for different reasons.
“Gold prices have been on a steady rise over the past few months. With current geopolitical tensions showing no signs of abating, I believe these factors will continue to drive gold prices throughout November,” Barker said.
Barker also pointed out that continued economic growth in the two largest gold consuming countries, India and China, is likely to continue to drive gold demand.
