INTERVIEW: For economist Thorsten Polleit, the next major interest rate cut cycle is already a fact – with good prospects for precious metals, stocks, bonds, real estate and other tangible assets.
For the first time in human history, the price of gold reached the 2,500 US dollar mark per troy ounce (31.1 grams) last week. We spoke to Thorsten Polleit, an economist with a doctorate, honorary professor at the University of Bayreuth and a proven precious metals and investment expert as the editor of “Dr. Polleit's Boom & Bust Report,” about the background and future prospects.
STOCK EXCHANGE ONLINE: Mr. Polleit, who are the buyers who are driving up the price of gold?
THORSTEN POLLEIT: Central banks in emerging markets in particular are steadily building up reserves. The BRICS countries – Brazil, Russia, India, China and South Africa – and other non-Western countries are resisting the US using the dollar as a means of pressure. The freezing of Russian currency reserves, including in the EU, has increased mistrust in parts of the world. The US dollar and euro are no longer seen as safe havens. Higher gold reserves are intended to reduce the risk of a world monetary system that is becoming dependent on the US dollar.
However, China reduced its gold purchases in the second quarter. Are you stepping in to replace them with something else?
To the extent that the transactions were made transparent at all, demand was actually driven by other countries. Russia, for example, has accumulated the largest gold reserves. However, we must limit ourselves to the fact that we often do not know who the buyers and sellers are. Because a large part of the trade between the states It goes through the Bank for International Settlements. This is, if you will, the house bank of the central banks, which does not have to disclose who is behind the transactions. Apart from that, central banks are only one of several buyer groups, but by no means the sole driver.
Who are the others?
Wealthy private investors, but also institutional investors, are fueling demand. This is no surprise given the numerous geopolitical crises. The trend towards increased purchases by central banks and investors seeking safety is likely to continue if the world continues to divide. In addition, we are already on the verge of the next major interest rate cut cycle.
So quickly? The central banks have recently withdrawn massive amounts of money from the market.
They have actually done that, with the consequence that disinflationary tendencies will emerge with a time delay. The closer the inflation rate approaches the two percent target, the looser monetary policy will become. Interest rates are already falling – except in Japan, which is a special case. But the ECB, like the Swiss National Bank, has and the Bank of England have already begun to lower interest rates. The USA is expected to follow suit in September. The monetary policy floodgates are opening again after a short period of calm.
Gold expert: “We are dealing with major crises”
Why?
Because politicians and central bankers see money supply growth as the lesser evil at the slightest sign of a crisis. We are dealing with major crises, which is why I am deliberately talking about a major interest rate cut cycle.
With correspondingly positive effects on the price of gold?
Not only that. Almost all asset classes will benefit from the flood of money, whether bonds, real estate or other tangible assets. And – of particular interest to your readers – shareholders will also be able to enjoy price gains.
What is your target price for the gold price?
Believe it or not, I've never thought about it. In the short term, a correction is not unlikely after the recent rise. In the long term, however, the trend is absolutely intact, and everything speaks in favor of gold. Since the beginning of the 21st century, the price of gold has always risen at least by the same amount, and central banks have expanded the money supply, i.e. by around eight to nine percent per year. It is quite possible that we will see a somewhat stronger increase with the downward turn in interest rates. 2800 dollars per troy ounce is not out of the question over the next twelve months.
Thorsten Polleit (56) is considered one of the most prominent critics of the paper money system and the EU's debt policy. He has been teaching as an honorary professor at the University of Bayreuth since 2014 and is president of the German Ludwig von Mises Institute. After working at ABN Amro and Barclays, he was chief economist at Degussa Goldhandel from 2012 to 2023.
By the way: This article first appeared in the new print edition of BÖRSE ONLINE. You can find it here
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