The Federal Reserve’s balance sheet is at risk of devaluation, and should the underlying assets fail, gold will respond by “rising to a price that balances the Fed’s balance sheet,” said Dan Oliver, founder of Myrmikan Capital.
“The Fed, as you know, has been on a massive purchasing spree because of the virus situation, and so therefore the equilibrium price of gold is going up commensurately, and so the numbers now to balance that balance sheet are enormously high,” he said. “My [forecast for gold prices] has changed. I’m at $10,000 now.”
The move to higher gold prices stems not only from an inflating Fed balance sheet, but also from the health of the balance sheet itself, which Oliver noted could be in jeopardy.
“When you project a crash in the value of the other asserts of the Fed, i.e. the mortgage bonds that they own, the Treasury bonds that the own, all these new funky commercial debt that they’re buying, some of it sub-investment grade, when those things crash the Fed will find its assets completely stripped of value…and that will have a big impact on the dollar.”