Tags: Tice | Gold | stocks

David Tice: Gold to Soar to $2,500, S&P Will Plunge to 1,000

Wednesday, 21 March 2012 01:31 PM

Gold prices will soar to $2,500 an ounce within two years, while the S&P 500 index will tank to 1,000 in just 18 months, says David Tice, president of Tice Capital and former chief portfolio strategist for bear markets at Federated Investors.

Gold is currently trading around $1,650 an ounce, while the S&P 500 is hovering around 1,400.

Blame loose monetary policies and excessive government debts for the coming stock market crash, which tends to send investors flocking to gold.

Editor's Note:
Meltdown on Main Street Coming, Prepare Now

"The policymakers are doing a great job in kicking the can down the road. Essentially we feel just like back in 1999 and also in 2007," Tice tells Fox Business Network.

"In both of those periods people were positive about credit being created, the central banks were easy, everybody was complacent and we ended up having a big accident."

After the most recent downturn, the economy tanked and the private sector began paying off its debts.

The federal government, meanwhile, ramped up spending via stimulus packages, while the Federal Reserve cut and kept interest rates to near zero and injected trillions of dollars into the economy to stave off deflationary threats.

As a result, the dollar has weakened, and inflationary threats will rise.

"If the problem is too much debt, you don't get out of the problem with more debt, and that's where the Keynesians are wrong," Tice says

Gold has soared in recent years, as the yellow metal often serves as a hedge against inflation and other uncertainties.

Calls for a return to the gold standard have risen as well.

Since a gold standard sets the value of the dollar to an amount of gold, the government would be unable to run up debts and live beyond its means.

That won't work, says Federal Reserve Chairman Ben Bernanke, since it will take away monetary flexibility needed in both good times and bad.

"Since the gold standard determines the money supply, there is not much scope for the central bank to use monetary policy to stabilize the economy," Bernanke told a lecture at George Washington University, according to Reuters.

"Under a gold standard, typically the money supply goes up and interest rates go down in a period of strong economic activity — so that's the reverse of what a central bank would normally do today."

Editor's Note: Meltdown on Main Street Coming, Prepare Now

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Wednesday, 21 March 2012 01:31 PM
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