Ian McAvity Sketches Out The Dark Side Of $3000 Gold

McAvity expects $3,000 gold in the next two years, but he doesn't see it as cause for any real celebration. He basically says that such an eventuality is a forecast for stagflation, which will not be good for stocks.

"I have very little confidence of what I would call the outcome of quantitative easing as is being pursued by both the US and Europe. So we've got in a sense, the second half of the bear market that started three years ago - we're only just starting the second half of that now and you might say that the first half of it was arrested by the central bankers bailing things out. The problem that we've got now is the central bankers are wielding a bailing can that has holes in it. It's the bailers that have now run out of credibility."

He also said that the current bull market is far more orderly than the one in the 1970s, even though there are parallels between now and 1978. To him, the key to gold's rise is a negative real risk-free interest rate. In addition, he points out that a demise of the Euro would cause a lot more chaos than the forecasters of such a crack-up seem to expect.