Dowd Sees Gold's Road to $10,000 Born in Next Crisis

Edward Dowd, a well-known financial expert, recently appeared on Commodity Culture to discuss the current state of gold and silver markets. Despite the recent decline in prices, Dowd remains bullish on gold's prospects, predicting that it will eventually reach $10,000.

Dowd attributes the recent drop in gold prices to consolidation, a necessary step before the metal resumes its upward march. He notes that yields have been rising due to the war and oil price increases, but believes this is only a temporary factor. In the long term, he expects yields to reach a point where they choke off lending and business credit contracts, leading to economic growth slowing down.

Dowd also discussed his tool for predicting Fed rate hikes, which involves comparing the three-month bill with the midpoint of the funds rate. He believes that the recent quarter-point hike by Kevin Warsh was a policy error, as it threatens to stall housing and widen yields on non-traditional loans. Private credit is already showing signs of distress, with outflows and widening spreads.

When asked about his prediction for gold's price, Dowd emphasized that the road to $10,000 is not a straight line but rather born in the next crisis. He expects growth to slow down, credit contracts to tighten, risk assets to sell off, and the Fed to be forced to print money. At this point, gold will benefit from the disinflationary scare, just as it did during the 2008 financial crisis.

However, Dowd warned that before reaching the $10,000 target, investors can expect a period of pain, characterized by a debt crunch, private credit breaking, and a stock market overconcentrated in one trade. He also expressed concerns about China's economic woes and the US-China relationship, which he believes will not rescue either side.