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How to Beat Unlimited Monetary Stimulus With Gold

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Precious metals investors should not be paying much attention to the short-term price action in gold and silver. Instead, Andrew Hecht, founder of the weekly Hecht Commodity Report, said that unprecedented monetary and fiscal stimulus will ultimately drive gold prices to record highs in the long-term.

In an interview with Kitco News, Hecht said that he continues to see similarities between the price action in gold during the 2008 financial crisis and current market conditions as the global economy has been devastated by the COVID-19 pandemic.

"In 2008 the U.S. Federal Reserve and all the central banks around the world put lots of stimulus into the system, and it led to an overall rally in commodities. Gold and silver particularly did well," he said. "I'm not going to ever fight the central banks of the world."

Hecht’s comments come as gold prices struggle to hold momentum above $1,700 an ounce.

Hecht noted that the most significant difference between the two crises is just how much money the central banks and governments have pumped into financial markets. He said that between July and September of 2008, the U.S. government passed stimulus measures of more than $500 billion. In just the last two months, the government has spent $3 trillion.

"So the bottom line is the money supply is growing dramatically, and that's bullish for gold and silver, and it's bearish for Fiat currencies," he said.

But Hecht is more than just bullish on gold; he said that he also sees potential for higher silver prices in the long-term. He added that the critical technical level to watch is $21 an ounce.

"If I want to buy on a dip, it's silver I'm going to be buying because I think that that's the one that moves the most on this percentage basis, but when it comes to long-term investment, gold is what I want to hold," he said.

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