Forget $10,000 gold, the trend is higher until governments fix their debt – John LaForge

Gold’s dramatic rise over the last several years may have pushed prices to levels that once appeared unimaginable. Still, according to one market strategist, investors shouldn’t get distracted by price targets.

In an interview with Kitco News, John LaForge, Chief Alternative Strategist at Ned Davis Research, said the gold trade remains extremely simple: the precious metal’s long-term trend remains higher until governments around the world finally confront their mounting debt burdens.

Asked whether investors should be looking toward $8,000, $10,000 or even $12,000 an ounce, LaForge said those levels aren’t particularly important to his outlook.

“To me, it’s not like there’s this point that it’s, ‘Oh, it’s 8,000, oh, it’s 12,’” he said. “All I know is the trend is up until we deal with government debt. I think we can still see multiple years of higher prices because I don’t get the sense at all that, globally, politicians and leaders want to deal with it,” LaForge said.

Although gold has risen from around $1,500 an ounce to more than $4,000 over the last decade, LaForge said the precious metal still has plenty of room to run. He sees the market roughly six or seven years into a broader commodity supercycle, with no evidence that the long-term trend is nearing exhaustion.

“We have plenty of room for this thing,” he said.

LaForge described the current environment as potentially one of the strongest fundamental backdrops gold has ever experienced. The critical difference in this cycle, he said, is that central banks have emerged as an important source of structural demand as they reconsider the security of traditional reserve assets. That shift accelerated following Russia’s invasion of Ukraine in 2022 and the subsequent freezing of Russian foreign reserves.

According to LaForge, the episode forced central banks to recognize that assets held within the global credit system ultimately remain exposed to government control. Gold, by comparison, remains one of the few globally recognized “bearer assets” that can be physically owned outside that credit system.

“There just aren’t many bearer assets that you as a central bank can hold where everyone in the world pretty much agrees, if you sent them a bar of gold, they’d say, ‘All right, I’ll take payment for that,’” he said.

At the same time, LaForge said the enormous expansion of sovereign debt is creating an increasingly powerful tailwind for hard assets. With governments continuing to pile on debt, he sees few politically palatable ways out other than eventually resorting to currency debasement.

While the U.S. economic situation has garnered significant attention in recent weeks as the nation’s sovereign debt has pushed beyond $40 trillion, LaForge said Japan could offer an important warning for other heavily indebted developed economies.

LaForge said policymakers in the West had hoped Japan could demonstrate that governments could suppress borrowing costs indefinitely through yield-curve control despite enormous debt loads. Instead, rising Japanese yields and the unwinding of decades of ultra-loose monetary policy are demonstrating the limitations of that strategy.

LaForge said he remained bullish on gold through its months-long correction as government debt continued to grow. He added that the debasement trade was reignited by the Treasury Department’s intervention in markets. He explained that he saw gold’s selloff as a market simply waiting for another ...