Can gold only go up? Can only bullish things happen for it? What if?...
Two days ago (I encourage you to read it if you haven’t done so), I compared the current extreme fundamental forecasts for gold and expectations for the gold market to what we saw in 2011 – (un)surprisingly, many things align despite we’re fourteen years later.
As previously, I’ll take an alternative approach. Instead of responding directly to the critique and discussing why this time is different (different economic and geopolitical landscape) but actually isn’t (ultimately, fear and greed drive the markets, it doesn’t matter that much what drives them – the markets will get ahead of themselves and need to correct regardless of fundamentals), I’ll once again invite you to a journey.
Last time we went back in time – to 2011. This time, our time machine will be set to the future. I’ll show you twelve what-if scenarios that could make gold price plunge.
They will be rather extreme and not necessarily likely to take place. And my point here is NOT to make a valid forecast of those specific events (I’m not fully supporting any of those forecasts, but…), but rather to do something else.
You see, when you hear the “imagine that…” or “what if…”, the way the human mind works is that you really visualize the scenario and whether you believe it or not, to your subconsciousness, it becomes somewhat real. The more frequently you revisit a given image, the more real it becomes. There’s a good reason why commercials are set in campaigns – to expose you to a certain image/message over and over again, so that it “sticks”.
What is essentially happening is by re-visiting the same images, thoughts, and patterns in general, you tend to attribute greater importance to them. And they might (and likely would) drive your decisions at some point. If you’re doing this by your own will, you’re essentially manipulating yourself or transforming yourself (if you use this technique to “install” some supportive beliefs).
The same mechanism works when you use several yellow post-it notes with a message like “I eat only healthy products” to make this a reality, and when you read about “inevitable” and super-bullish scenarios on gold or any other asset.
I have a friend who watched auctions of expensive watches for so long that he convinced himself that owning one is one of the key things in his life. To clarify, I have nothing against buying yourself what you want, but the point is that he made it extremely important while – objectively speaking – many other things in life likely deserve more attention than that. Like the quality of your relationships.
Getting back to the point, back in 2011 people kept reading over and over again why gold has to soar, and they kept believing higher and higher gold prices are coming. Experts believed that too and they kept coming up with higher and higher gold forecasts.
Isn’t the same happening right now? Just yesterday, I posted a letter in which the author observed that there are very few people that dare to say that gold could decline from its current levels (am I really the only one?).
The point of me posting the below scenarios is not to “install” any belief about the price, but rather to balance the visions and forecasts that you can see… Pretty much everywhere else.
Yes, some are ridiculous, but some of the most bullish cases for gold are ridiculous as well (not all of them, of course).
So, before dismissing them as BS, please keep in mind that they were created to be extreme and perhaps unrealistic on purpose.
At the same time, please keep in mind that it is not the case that all of them would have to happen for the gold price to decline significantly. Just one of them could have this effect. And…
Can you really rule out just one of them taking place? (I can’t.)
This is an excellent question to ask, when you are asked a “what-if” question that will imply higher gold prices. Each bullish what-if could be balanced with equally bearish what-if of some different kind, ultimately leading to a much more objective approach to markets (not just gold) and thus making better investment decisions.
Enjoy:
12 Extreme Scenarios That Could Trigger a Gold Price Collapse
(Or: How I Learned to Stop Worrying and Think About the Unthinkable)
1. Global Deflation Crisis
(The "Everything Must Go!" Sale Nobody Asked For)
Large-scale deleveraging leads to a deflationary spiral where cash becomes king. Similar to 1930-1933, debt defaults cascade through the system, causing mass liquidation of all assets including gold to raise cash. Central banks lose control of the deflationary forces despite their best efforts.
Potential Impact: Gold could fall 40-60% as desperate investors seek cash at any price.
2. Quantum Computing Cryptocurrency Revolution
(When "Bit" Meets "Qubit" and Gold Gets Jealous)
A breakthrough in quantum computing leads to virtually unhackable cryptocurrencies that are adopted by major central banks. These new "quantum-secure" digital currencies combine the best features of gold (scarcity, durability) with superior features (instant transfer, perfect divisibility, zero storage cost).
Potential Impact: Gold could lose 50-70% of its monetary premium as institutional investors switch to quantum-cryptos.
3. Asteroid Mining Becomes Viable
(When "To the Moon!" Goes Horribly Wrong)
SpaceX or Blue Origin successfully demonstrates profitable asteroid mining technology. Even before actual mining begins, the mere proof of concept causes markets to price in future supply expansion. A single metallic asteroid could contain more gold than has ever been mined on Earth - making your neighbor's extensive gold coin collection about as rare as those Beanie Babies in their attic.
Potential Impact: Gold could drop 60-80% on futures markets pricing in eventual supply increases. Good news: at least your "space mining" sci-fi collection might finally be worth something.
4. Major Central Bank Gold Sales
China reveals it has accumulated far more gold than analysts estimated (perhaps 20,000+ tons vs market estimates of 2,000-4,000 tons) and announces plans to sell significant portions to support its troubled property sector. Other central banks, seeing this as a strategic opportunity to diversify reserves, join the selling. The wave of sales dwarfs the 1990s central bank sales agreements in scale and market impact.
Potential Impact: Gold could fall 30-50% as the market attempts to absorb unprecedented official sector supply while also adjusting expectations about central bank demand.
5. Artificial Gold Synthesis
(Or: How Medieval Alchemists Finally Got Their Revenge)
Advanced particle accelerators make artificial gold production economically viable at scale. While initially expensive, the technology shows a clear path to much lower production costs within 5-10 years. Somewhere, Isaac Newton's ghost is having a very complicated day.
Potential Impact: Gold could decline 70-90% as its scarcity premium evaporates faster than your uncle's get-rich-quick schemes.
6. Global Interest Rates Spike to 15%+
A severe inflation crisis forces central banks to raise rates to Volcker-era levels or higher. The extreme yield on "risk-free" government bonds makes non-yielding gold deeply unattractive.
Potential Impact: Gold could drop 40-60% as investors switch to high-yield bonds.
7. Global Property Rights Revolution
A breakthrough in international law creates a new unified global property rights system with perfect tracking and enforcement. Smart contracts and new technology make all asset transfers instant, secure and nearly free. Traditional safe haven assets become less necessary as property rights become completely secure, even in formerly unstable regions.
Potential Impact: Gold could fall 30-50% as its traditional role as "stateless money" becomes less relevant.
8. New Age of Global Peace & Stability
(Also Known As: "The Day Hell Froze Over")
Breakthrough diplomatic agreements resolve major geopolitical tensions (Russia-Ukraine, China-Taiwan, Middle East). New era of international cooperation and reduced military spending begins. Gold's crisis insurance premium becomes less relevant, much like your collection of apocalypse survival guides.
Potential Impact: Gold could decline 20-40% as geopolitical premium fades. Though let's be honest, if we achieve world peace, we might have bigger things to celebrate than gold prices.
9. Revolutionary Energy Technology
Breakthrough in fusion power or similar technology promises virtually unlimited, cheap clean energy within a decade. Global growth prospects soar while inflation concerns (and PCE) plummet. The "fear trade" that drives gold becomes less compelling.
Potential Impact: Gold could fall 30-50% as growth optimism replaces fear.
10. Cultural Shift Against Ownership
Global cultural revolution makes ownership itself an outdated concept as society shifts toward usage-based economy. People focus on experiences and access rather than possession. Subscription and sharing models dominate all aspects of life. Physical wealth storage becomes viewed as wasteful hoarding of resources that could be in active use. Gold, as the ultimate "just sits there" asset, becomes particularly unfashionable.
Potential Impact: Gold could drop 40-60% as ownership-based wealth storage loses cultural relevance.
11. Investment in Human Capital Revolution
A major societal shift occurs where people of all ages begin prioritizing investment in personal development over traditional asset accumulation. This transformation is characterized by:
- Growing recognition that skills and adaptability create more security than stored wealth
- Surge in adult education and skill development across all age groups
- Emphasis on experiences and personal growth over asset accumulation
- Rising preference for cash flow generating skills over static wealth storage
- Increased focus on health and longevity investments
- Strong trend toward funding continuous learning and personal development
- View that the best investment is in oneself and one's capabilities
The movement starts with younger generations but spreads across all age groups as people recognize that in a rapidly changing world, the ability to learn and adapt is more valuable than traditional stores of wealth.
More serious/realistic note: whether there will be any impact of this trend on gold prices is one thing, but the impact on people’s quality of life would be very positive (also through increased investment success rate from the individuals that can invest with greater peace of mind and with supportive relationships). That’s what we’re aiming to support at Golden Meadow®.
Potential Impact: Gold could decline 30-50% as capital progressively shifts from traditional stores of value into personal development and skill acquisition across all demographics.
12. Russian Sanctions Relief
(From "Swift Kick Out" to "Swift Comeback")
A comprehensive lifting of Western sanctions against Russia leads to normalized trade flows and reduced geopolitical tensions. This development:
- Decreases the urgency for alternative financial systems
- Reduces pressure to create new non-dollar trade mechanisms
- Lessens the appeal of gold as a sanctions-proof asset
- Returns significant Russian gold to global financial markets
- Normalizes central bank reserve practices
Potential Impact: Gold could decline 10-20% as the "sanctions hedge" premium dissipates and normal trade flows resume. Though let's be honest, the impact on your local caviar prices might be more noticeable.
Given the most recent developments, this could be a quite realistic scenario, at least in case of the U.S.
Important Context
(Or: Why You Shouldn't Panic... Much)
These scenarios are deliberately extreme and speculative - think "financial disaster movie scripts" rather than "likely Tuesday afternoon events." They are presented not as predictions but as thought experiments to:
- Challenge default bullish assumptions (yes, even that one you're absolutely certain about)
- Identify potential risks to monitor (besides your neighbor's new asteroid mining startup)
- Encourage more robust portfolio planning (no, moving your entire capital to crypto doesn't count as "diversification")
- Promote consideration of multiple scenarios (even the ones that make you uncomfortable)
Most of these scenarios are unlikely in isolation and would face significant obstacles. However, aspects of multiple scenarios could combine in unexpected ways to pressure gold prices - sort of like that time you tried to fix your printer and accidentally caused a small fire.
Of course, even considering bearish scenarios doesn't negate gold's historical role as a store of value (you have gold in your IRA, right?). Rather, it promotes more thoughtful long-term investment planning and staying as objective as possible. Thinking about rainy days doesn't negate summer, and it’s actually necessary for the plants (your portfolio, your overall life quality) to grow.
Just don’t forget that umbrellas (portfolio diversification, hedging, limiting position sizes for speculation) exist for a reason.
If you enjoyed the above analysis, please note that there’s so much more available to premium subscribers. If you want the best, you’ll find it in our Diamond Package. There are many other premium plans available, though. Choose the one that suits you the most. And if you’d simply prefer to stay up-to-date with what we have available for free, our free gold newsletter would be a good choice – sign up today.
Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief