Could gold prices increase by 50 percent by fall?

During a recent interview on CNBC, former Congressman Ron Paul said he wouldn’t be surprised at all if the stock market falters and sends gold prices sky high by October.

The longtime fiscal conservative contends that recent bright spots in the stock market are getting too much attention as most mainstream economists ignore the likely consequences of an overdue correction in the markets as the Federal Reserve gradually tightens its monetary policy.

“If our markets are down 25 percent and gold is up 50 percent it wouldn’t be a total shock to me,” Paul said.

The market shudder Paul is predicting would send gold prices to about $1,900, inching close to the highs experienced as the economy staggered out of the recession.

The Fed will likely try to reverse any damage that occurs as it gradually raises interest rates, but Paul argues that recent history provides plenty of evidence the central bank can only make matters worse.

“I think it’s a very precarious market, and the Fed better be very careful. Since they are incapable of knowing what to do, I don’t expect much good to come out of anything they do,” said Paul. “There are so many mistakes made out there that the correction is almost unlimited.”

The Fed’s current policy has seen gold prices fall in recent months as many American investors see signs of U.S. economic growth in the months ahead.

Paul would encourage those investor to hang on to their gold– because we’ve yet to see the economic adjustment that follows growth periods.

“People have been convinced that everything is wonderful right now and that stocks are going to go up forever,” Paul said.

“I don’t happen to buy this,” he added. “The old rules always exist, and there’s too much debt and too much mal-investment.”

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