Declining onto an empire forges its alliance with germany and the central powers as the war gives birth to 3 nationalist movements the road to time and the future world war one through the eyes own knowledge is iraq. How high can the price of gold go the precious metal is being sold for a record 2000. 00 an ounce whats driving the gold rush and could it affect the chances of economic recovery from the coronavirus and that this is a story. Alone welcome to the program. The coronavirus pandemic means we are facing our worst ever recession shutdowns to control the spread of the virus have forced many businesses to close millions of jobless and when times are tough investors tend to put their money into socalled safe haven assets such as gold. Precious metal hit a record high of 2060. 00 announced a couple of weeks ago thats a 30 percent rise this year now some analysts are predicting prices to soar to 3000. 00 an ounce by next year the price rise is particularly being felt by indians theyre the 2nd largest buyers of gold in the world for weddings special occasions this is only going to be a bit not literally every business except the. Products and everything is done. Really was of absolutely. 90 percent now because people are not coming out of the store. So people are not in bank people would have cash. Purchasing less jewelry than we used to buy earlier we will have to purchase one necklace instead of 2 and we also have to lower our budget for purchasing a culture change. That there are very few customers buying gold because everybody is focusing more survival rather than buying gold on luxury items because of the corona virus pandemic everybody is trying to save their lives most are thinking about how to survive. Lets bring in our panel in new york Christian Lawrence Senior Market strategist robert bank in london Michael Hewson chief market analyst at the Financial Firm c. M. C. Markets and from new delhi our income a professor of economics at the institute of social Sciences Welcome to you all id like to begin in london with you Michael Hewson i dont own any gold why should i care about the price of gold what does what does it mean for me and the dollar the pound the ruble in my pocket well what i think what the rise in the gold price tells me is theres an awful lot of people out there concerned i think around about the financial degradation if you like well that. Currencies stocks as a result of the laws. Scale fiscal and monetary stimulus thats being implemented not only by Central Banks but also by governments around the world in response to this coronavirus pandemic and theres also the added factor that the trumpet ministration is weaponize ing the dollar in its dealings with overseas counterparty say for example i challenge russia now the thing with gold is you cant what you can monetize it and when youve got people like Warren Buffett turning decades of thinking on its head and going from saying the gold has no useful utility to buying a 1. 2 percent stake in barrick gold one of the biggest gold miners that suggests to you there are an awful lot of peoples thinking around gold and its value is changing in the face of this pandemic but also as a result of the monetary stimulus this being unleashed and fiscal stimulus being unleashed around the world in new york Christian Lawrence is this a matter of something thats been developing over a long time or is this really being driven by the current virus pandemic are we seeing something new here or is this something thats been bubbling up for a long time. Well i think of the basic level its really been bubbling up since the Global Financial crisis because of course thats when we started to see Central Banks expand their Balance Sheet conducted constantly easing and really this is a story of 2 stories theres the negative real Interest Rate story and there is the general deep basements that fit currency because of central bank Balance Sheet expansion whats happened during the coded 19 crisis is of course weve seen Central Banks expand their Balance Sheet very very rapid pace i mean the fed has expanded its Balance Sheet 67 percent since march so this is about the general deep basements of all spirit currencies so. It was happening beforehand but it certainly accelerated dramatically because of the pandemic and because of the actions from Central Banks and governments earn kimo and new delhi india traditionally has valued gold for a very very long time youre looking quite small right well. Reserves of gold into court huge yes you know goldman is one of the assets in the portfolio i think that people who are and when there is uncertainty people shift toward gore so the pandemic has created a huge uncertainty and thats why people are shifting toward gore with a good thing is that you know there are Cultural Values associated with poor so in india and china people voted argemone of poor because up you know reasons of waiting and you know was so on and so forth but also let me say that a good price in india is determined by the International Price because india hardship uses any gold and i think whats happened is that the demand is shot up but the supply of gold is limited because it mine only you know through country to go straight russia. Will go short fall in that supply of gold but the demand has shot up a lot of people shipping clerk buying gold and thats why the price of gold have risen but id also like to add that gold is an unproductive asset you know it doesnt lead to where the production if you would invest in your money in say you know the sun you know factory or something if youre produce something but if you invest your money in gold then it doesnt give you but the advantage that gold has to appear great is that its a commodity money so you know commodity money always be carry some value so even if the rupee you know depreciate gold would not depreciated. So that it often its seen that then you know other as it prices decline like share prices and realistic prices then people ship into gold as a hedge you know as a means of you know maintaining value of their assets. The only reason gold has any value is because we give it value we like the idea of it so we value it at that price i mean as you say its an unproductive asset but why is this such a seen as such a safe bet in times of uncertainty so you see that if there are really short supply because you know are there as that kind of huge if youre shipping a small part of that you know from some assets into court then theres no shortfall or. You know demand supply and therefore you know the price of gold go up youre going to see it in a sense if you go you know according to borger counsel or the last 40 years then gold is going 40 percent return youre a pretty good dont compared to many other assets you know and specially you know in short on speculation it just stock market is going down you should go and you can you know liquidate and ship it back its very liquid so you can always get ignored because. There are many advantages more corporate you know were going to have our value theres actually a very you know sort of value is not just because of speculation but value also because theyre going to cost you if theyre quite right what do you think the court were going to inherent value in court enable it to become a very serious speculative bet in times of uncertainty Michael Hughson in london it is a safe speculative bet right now but only because as i say we give it value our selves in actually do anything it doesnt actually make any any money so michael you know is this a safe bet long term or are we looking at a bubble like in a bulbs in the hole and innocent theres no such thing as a safe bet if you look at what gold has done over the last decade for example in all time highs in 2011 around about 19211021 dollars an ounce and almost halved in value to lows in november 2015 and since then its pretty much doubled in price so. And its not one of those assets that essentially if you hold it for 20 or 30 years its going to generate a return its like any other asset you dip in and out of it when circumstances dictate one of the one of the main criticisms that ive heard about gold is that in real terms in as inflation hedge it is actually lower than its 19 eighties highs but ultimately no one no one holds a single asset a stock. A commodity or anything else for 20 to 30 years you rotate into and out of various assets over the lifetime so that you generate a return on a consistent return over a time frame so while no one is suggesting for the moment that gold is probably going to be worth 10 in 10 or 15 years time an awful lot more than it is now for the time being it is very very wise at a time of negative Interest Rates to have some exposure in gold simply because of the gains that weve seen over the course of the past 5 years now its going to be a choppy ride in the interim but i would certainly argue with a certain degree of confidence that 5 or 10 years from now gold prices are probably going to be worth a lot more than they are right now you can make the same argument about utility the useful utility of a company like it doesnt generate any revenues in terms of profits and yet the market assigns a very high valuation relative to the amount of money it actually loses so its really a bell funneling money into areas of your portfolio which will generate the greatest return. Christian lawrence a new york oh we have a stage where capitalism has gone slightly bonkers and we are assigning value to things like that doesnt make any money they were assigning value to things like gold because were a bit nervous about what the market is my day surely its better for federal banks central is a banks governments to put their money into production into making things into job creation rather than the short term bets would seem to be driving up the price of gold well if you suddenly make a very valid point i mean i would argue that we dont have free market capitalism at the moment when Central Banks are essentially backstop in Financial Markets shareholders are backstops at the moment because of the actions of Central Banks now gold has a long history of being a form of money thousands of years thats why it is still viewed as such if you take a dollar we view the Dollars Money because we have faith in the u. S. Government we view gold as money because its a historical factor thats been around for thousands and thousands of years but youre quite right what weve seen particularly in the last decade but really since the 1986 is that we live in a world of financialization the idea of quints to the zing of cheap money was that companies would invest in real well thats it wed see productivity growth we see wage growth wed see Economic Growth and the economy functions well but instead companies essentially have used that cheap money to buy back their own shares to Financial Lives themselves which has meant that asset prices in the form of say equities have continued to march higher but without productivity growth we dont see why and thats one of the reasons why weve seen this huge surge in inequality over the last 10 years because why dissipate pretty stagnant while its asset prices have continued to rise and that is a direct result of actions by Central Banks of putting so much money into the system providing money for say the sheikh next to nothing or in some cases negative income or in new delhi for further rapidly developing economies like india a powerhouse in the world. Is the bet on gold the traditional bet they have on gold actually a help or a hindrance when it comes to developing long term the economy im just trying to understand why what does this benefit an economy like indias or not really doesnt because india doesnt produce gold entirely imports it up to about 800. 00 tons of gore for the last many years this year the imports have come down because the price isnt substantially but what it means that the savings from the economy are leaking out indias as it is kept short it needs money for its own development but then money leaks out that savings out because you have to abide the gorgon dollars and also effects the balance of payment at this point because exports and imports are down you know if you have a surplus or not that is a payment but you know usually we have a deck sitting on the current account and in 21213. 00 we had a huge crisis because a lot of importer gold was taking place at that time you lot of speculation going on so in a sense you know you know the more people buy gold the worse it is for the Indian Economy because it affects investment in the economy especially the productive investment and thats what you need you know to overcome poverty to improve development and so on literally unproductive thing but what has happened is that in india that a Cultural Values you know people get a lot of gold at the time of their doing they want to you know hold onto gold you know because traditionally thats what theyre done its been a safe bet for the for people you know its a hedge against inflation in india where inflation has been reasonably high over several decades so you know what all you know many people what a bell the part to hold or 2nd is that you know certain amount of gold is smuggled in because people also who are black incomes in the form of you know gore so they arent like incomes and then the savings that has in the hollow who are so that also drives the price of gold you know in india and actually you know buys 800. 00. 900. 00 pounds of gold from the International Market so for india an economy its not a quantity because black money also means that while if you theory it also means that you know your investment is not going to productive because you know the black economy you know also drive on productive activities that are going to be a human buying of gold in india is a negative people the Indian Economy in london Michael Hewson is there an upside to any of this say for example people are buying more gold is that actually good for anybody other than the people selling gold would argue no because the simpson or the reason why gold is rising the way that it is is because people dont have any confidence in fear at currencies and ultimately politicians if you look at the problems facing the Global Economy at this time in pretty much since the financial crisis what kofi 19 pandemic has done is crystallize the problems the structural problems within the Global Economy and what the move into gold prices is telling us no not just against the dollar were seeing record highs for gold against pretty much every single currency there is what is telling us is that the Financial System is in significant difficulties as a result of the large scale stimulus programs that have been undertaken by Central Banks the lack the lack of political will by politicians to address these problems ultimately whats happening at the moment is a sticking plaster on the problems facing the Global Economy even to get a look at the Banking Systems within europe in particular and obviously Warren Buffett is already given his im verdict on u. S. Banks by rotating capital out of them into go. To say that he sees significant problems in terms of growth in terms of return in terms of the Overall Economic outlook Going Forward as a result of the large scale monetise i thin that weve seen of the Financial System over the course of the past 10 years Christian Lawrence in new york is this an indicator that the Global Markets are about to crash are we looking at a 2000 style 2008 style crash saying no i dont think it indicates that but i do completely agree with everything that was just said about this essentially being a debasement of fit currency you know were talking about gold prices going up but really we could look at it through the other end of the telescope and essentially argue that the value of fit money has come down and thats why the price of gold it is heading higher so i think it just reflects this huge amount of liquidity that is being pumped into the system by Central Banks around the world you know the expansion of the Balance Sheet is not just the feds story when we look at the feds Balance Sheet its around about 30 percent of g. D. P. In europe were talking over 40 percent and of course in japan were talking over 100 percent and the reason i mention that is because we can see a lot more in the way of bond she expansion in the u. S. And in europe and if we do then thats likely to see gold prices move even higher or as i said the value of fear money even lower ok so the value of money is coming down out but i understand thats fairly simple but how does this how does this affect me how does a should i be worried as someone whos just somebody who works for a living should i whats every now my going to lose my job at some point because the Global Economy is going to crash because of some product i dont even. Well i mean a gold one because the crash gold is a reflection all of the price of gold is a reflection of these attitudes within the market we all say the shift in the value of money as it were but if you mention if youre just someone that is just in an income having job you just on a salary then yes things are very difficult at the moment if you own equities or you own assets then because of this the basement of fit currencies we continue to see them head higher so essentially its asset rich versus income pole so suddenly were moving into a world with things are going to be very difficult for people who are just. A salary whilst the last 3 months have been fantastic if you if you are not 6 weve seen a significant rebound with u. S. Equities looking at all time highs so its very much a question of we dont see the money from Central Banks driving Consumer Price inflation we havent put the 10 years but it has driven asset Price Inflation the idea that that hasnt been any inflation over the last 10 years isnt correct that has been its just that in the Financial Markets and that is likely to continue i suppose the difference this time around is we are getting more help from the fiscal side and that doesnt bode a little bit better for the average person on the street but suddenly these are going to be very testing times for everyone and even with Central Banks providing all this stimulus to the economy theres no guarantee that thats its just continue to march the ready that we have seen so far has been quite remarkable. Michael hewson in london how long wheres the crash point here where our long of we go if we dont do anything before gold gets so high and the value of money becomes so like well christian made a very fair point when he talks about the bank of japans Balance Sheet realty of 2 the Federal Reserve and the European Central bank you know potentially they could expand the size of their Balance Sheets to the same level of the bank of japan which suggests to me that this could go on for quite some time another 5 to 10 years at the very least i mean if i knew the answer to that iran id be a very very rich man i wouldnt be sitting here right now probably packing my bags and buy myself a little yacht but ultimately this status quo as it is cannot continue indefinitely ive been calling since 2012 when greece was bowled out for a dinner for in terms of the eurozone debt crisis yet here we are 8 years later and politicians always do just enough to keep the train on the tracks but youre right it cant go on forever but where the Tipping Point is i dont know in new delhi arun come our its an emerging market the subcontinent generally plus china these are places that are becoming powerhouses of the world theyre plugging into the traditional economies of the world not doing anything you know they just plugging into that is it time for china for india the big powerhouses to actually say you know what there is a better way of doing this and the western way of doing things is failed. You know we dont have that kind of independent Economic Policy at the moment because the world is job related but what i can say is that you know due to the pandemic actually headed towards a new ball was there are going to come up back to where we were in december 2019 people asked i said base you know is expanding but the Resource Base of the economy is declining you know in the new normal production structures the change you know because of physical distancing i think the potential output of the economy has declined and i think thats what the crisis point will be because several sectors which are doing well thats ok but many sectors are going to do rather poorly and their prices will decline and thats why the huge uncertainty that has been created now when you look at say an economy like india. You know dominated by Services Sector and thats i would suspect theres a van thats facing problems because of the pandemic Manufacturing Sector also certain sectors are facing problems because of the physical distancing so what i see coming forward is that the will be actually integrated because the other recovery will be much slower than that so europe or the u. S. Because you have a lot unorganized sector and people have migrated back into lady and so in Many Industries which are trying to revive are actually facing problem of a shortage of labor and therefore they are not able to revive and that if we did lock down that i think is in india and as a result of that again you know the economy suffering so we had a bit of a pickup in june but then july and august had been that down so this uncertainty that there thats what is driving the problem in india and thats why you know the stock markets had risen they not only in the indian context and i dont see any new policy emerging from india china also speccing head winds because i think the flight chains are going to be reoriented many cars are we only have to type in i would like to get to by other guests as well Christian Lawrence and just very quickly is this still the right way of doing business the system we have an oil and what we have to consider is what was the other. Well you know ive been quite critical of the impact that very Monetary Policy has as i mentioned earlier i cant say that we have free market capitalism anymore not in its purest sense but if we hadnt seen these measures from Central Banks if we didnt see fiscal stimulus from the government quite frankly we would have seen a Financial Market and an economic crash like weve never seen before so its very easy to poke holes at the Current System and without a doubt it is thought we will see more in the way of structural issues arise further down the line because of whats happened this year but the alternative would have been disastrous as well so its easy to criticize its hard to think of a better solution the market who said in london on our show the same question but just quickly is this the right way d of doing business in the short term yes but i think longer term politicians need to perform the act of trying to perform open heart surgery on an economy that still working in your previous guest made it clear a very good point about the globalization and i think politicians particularly here in the u. K. Need to try and construct the narrative the base of the shortened supply chains and then shift the investment criteria into much more renewable one localized industries to try and isolate shrink the disparity between the regions particularly in the u. K. Where there are large disparities between the lower end of the economic income scale and the higher end of the economic ins income scale so for me its not about the next 6 months its about the next 5 to 10 years where the politicians are allowed to do that is another matter entirely i want to thank all our guests Christian Lawrence marco hewson and aaron cohen thank you 2 for watching you can see the program again any time by visiting our website aljazeera dot com and for further discussion go to our Facebook Page thats facebook dot com forward slash a. J. Inside story and you can also join the conversation on twitter we are at a. J. 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