This week Dr. Thomas Carr (also known as “Dr. Stoxx,”), a former philosophy professor at the University of Oxford who is currently a fulltime market analyst and trader, told Yahoo! News 1 that there are at least 7 reasons why it is possible for gold prices to climb as high as $3,000 an ounce. At the time this article was written, gold was trading at $1,246.46 an ounce.

Dr. Carr points to a September 2012 Bank of America recommendation to buy gold, where a target price of $2,400 was issued. At the time gold was trading around $1,800 an ounce, but BofA predicted a price surge due to the negative effects of the Federal Reserve’s billion-dollar bond buying program on the value of the dollar. In fact, as Dr. Carr recalls, “B of A’s technical analyst, Stephen Suttmeier, went even further, making the case for gold at $3,000.”

Obviously this prediction did not pan out (no pun intended) and the reality is that gold prices have actually reached lows of around $1,180 an ounce in the past 2 years.

Now Dr. Carr is stepping up to say that perhaps Bank of America’s prediction was not wrong, just slightly off target. He presents 7 “new developments” since Bank of America made their prognostication that very well could result in the surge to $3,000 that was presented:

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  1. An overextended U.S. dollar
  2. The International Monetary Fund is reporting that Russia has been buying up record amounts of gold in order to support the ruble against “sanctions and low oil prices.”
  3. The industry expectation that China’s gold supplies are running low so they may begin raising prices or stop selling all together, which would create a gold rally.
  4. Carr believes that the changes made due to the gold price manipulation scandals have caused a “growing disconnect between the spot price of gold and the fundamental value of the metal. In the free market, these variances from mean-value always find a way of reverting to a fairer valuation.”
  5. The drop in the price of oil has reduced gold miners’ costs to a level that allows them to still operate despite the lower return on the metal. Dr. Carr believes that as oil prices begin to rise, that these miners will no longer be able to sustain their businesses leading to less suppliers and higher prices.
  6. Europe has followed America’s lead and has begun printing money in order to stimulate their economies. Many experts fear this is creating a worldwide “bond-bubble” that is destined to pop. Dr. Carr believes that when this bubble bursts “we’ll see a massive spike in rates, inflation (which is what Western economies want right now), and gold.”

For his final point, Dr. Carr quotes an old adage, “when governments do things right, avoid gold. But when they mess up, buy it.” In his opinion, the US government is doing things right from an economic standpoint. But since Dr. Carr is a philosopher, he also believes that all good things must come to an end and he feels that a correction is right around the corner.

Additional Sources

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