Russia’s war in Ukraine has led some economists to argue that irreversible changes are taking place in the geopolitical landscape. Meanwhile, fund managers at VanEck examined how this new environment will affect financial markets and the structure of reserve currencies as countries try to diversify their holdings. Taking the current trend to an extreme conclusion, the authors of the latest report, Natalia Gurushina and Eric Fine, see a significant rise for Bitcoin and gold. Here are the details…
The VanEck report drew attention to the rise for gold and Bitcoin
Analyst reports said, “All in all, the upside potential for gold and Bitcoin is dramatic. Specifically, gold prices are estimated at around $31,000 per ounce and potential Bitcoin prices at around $1,300,000 per coin. Precious metals are the original reserve asset, but cryptocurrencies are a possible addition/change/part.” Gurushina and Fine noted that for the first time in recent history, significant economic sanctions have been imposed on a world power.
“Something big has happened and we’re trying to quantify its impact,” said analysts. “China watches and sees the US/Eurozone/Japan becoming ‘nuclear’ in its economic war with Russia. The ‘stories’ about the future of money are interesting, but given that this is potentially a new paradigm, it was an initiative.”
The “practical price target” for gold: $3,100!
VanEck developed gold and Bitcoin price scenarios by comparing current gold reserves with the global money supply M0 and M2. The asset management firm noted that there are many central banks that do not hold gold. For example, the implied price of gold in Japan would be about $200,000. The implied price of gold for the UK would be more than $133,000. Analysts said, “By country, Japan is off the charts. He has a lot of money and very little gold,” he said.
Using the same calculations based on the global M0 money supply, VanEck sees an extreme Bitcoin price of $1.3 million. At the same time, using calculations based on the global M2 money supply, the price jumps to $4.8 million. VanEck said that while Bitcoin has significantly more bullish than gold, central banks will likely prefer the precious metal to cryptocurrency. Analysts conclude their report by saying they have practical price targets of $3,100 an ounce.
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