Casey Research’s Clark: QE3 Springloading Gold

October 08, 2012

Precious metals analyst Jeff Clark says financial consequences of dollar debasing haven’t hit home yet, but will in the form of double-digit inflation, and will push gold and silver much higher.

[This article previously appeared on and is republished here with permission.]

Jeff Clark, senior precious metals analyst at Casey Research, is a favorite interview subject for Hard Assets Investor. So in the wake of the Federal Reserve’s third round of quantitative easing, we thought we would catch up with one of the few gold experts who also works his family’s placer claims in California, Nevada and Arizona. For Clark, it’s easy to be bullish on gold when he sees a huge wave of inflation bearing down on the country from the debasing of the dollar. According to Clark, it’s not a matter of if inflation hits hard, it’s a matter of when, which in turn will spark a precious-metals mania.

HAI: What is your characterization of the boost that gold received from QE3? Was it what you expected?

Jeff Clark: The surprise for me was not about gold. Gold did what it was supposed to do. The surprise about QE3 was that the Fed announced an open-ended program. Most of the market expected some level of money printing, and they got that. What they didn’t necessarily anticipate was that it would be open-ended, and that was the surprise. That’s why gold responded the way it did.

Quite frankly, though, it’s less about the short-term movements and gyrations in the market and more about what the most likely consequences are as a result of QE3. For me, it’s less about the price and more about how many ounces you own. We don’t think what’s coming is a pretty picture. I’m not saying we’ll are going to be grubbing for berries, but we’re not optimistic about the health of the global economy. Therefore, gold is more about protecting your standard of living than trying to make some money.

HAI: More of the idea of store value?

Clark: Right. Because it’s more about what is coming, and how to protect yourself against that. Gold will be one of your best financial assets to hold in that environment.

HAI: What do you think is coming?

Clark: What Casey Research sees ahead, quite frankly, is some type of inflationary recession or inflationary depression. We don’t think the economy is going to be vibrant. We’re not going to be able to grow our way out of our massive debt—that seems pretty clear at this point. I would go so far as to say there’s no way out.

So this implies that they’re going to continue printing money. And of course the more you print, the lower the value of the currency and the higher the value of the gold price. To prevent this, politicians would have to suddenly become responsible and the Fed would have to immediately stop printing. But even if they did all that, we have yet to experience the fallout from what they’ve already done. It’s a punch line, but it’s still accurate: Inflation is baking the cake here. At some point, all that money is going to hit our economy. Inflation will trump deflation, because inflation always gets another turn until it wins. And that’s the path politicians are pursuing.

We’ve all gotten so used to a low CPI [Consumer Price Index] now that at some point it’s going to catch a lot of people off guard. And once inflation starts, it’s really hard to control. I would go so far as to say it will be game over. The world will be a different place at that point. It won’t be like what we have now, where prices stay reasonably calm. And when that happens, I think it could be the spark to a mania in precious metals. That’s not a prediction necessarily, but certainly a highly probable outcome.

HAI: And what are we talking about, a doubling of the CPI, 4 percent maybe?

Clark: No, I think it will be more like double digit at some point, and the reason I think that is simply because of all the money that they’ve printed. You can’t do these kinds of things and expect to have no consequences forever. It’s not free. It feels free of consequences right now because official inflation is low, but there are going to be ramifications. And this is one of the core arguments for holding gold right now. When that fallout hits, gold is going to be one of the best assets you can hold for protection.