Mark Skousen of Forecasts & Strategies recommends investors diversify their portfolios, including gold and silver in the mix. However, he said the yellow metal needs a weak US dollar to break US$2,000 per ounce and stay there.

‘The only way I think gold will break through and stay above US$2,000 is if the dollar becomes weak,’ he said. ‘And the dollar’s not going to become weak until interest rates start coming back down — that will cause the dollar to drop.’

When asked what could prompt the US Federal Reserve to reverse course and take interest rates back down to lower levels, Skousen pointed to the potential for a debt crisis in emerging markets.

‘The dollar is so strong, and most of this emerging market debt for example is all in US dollars, and they’re paying these very high interest rates. They’re not going to be able to pay that off. So I think there’s going to be an emerging market debt crisis. When that happens, the Fed is going to cut interest rates, probably pretty sharply, because of the fear of contagion,’ he said.

‘The US is in no position to have a major recession, because if we do that means the deficit is going to balloon even more — the national debt’s going to get out of hand. So the Fed doesn’t want that, but they may get it nevertheless.’

Looking beyond the US, Skousen mentioned global instability as a major concern. ‘We now have two major wars going on. We could have a third with China and Taiwan. The spreading of world war could be a serious destabilizing factor in the economy. Again very positive for gold and defense stocks and things like that … but we need to be alert to that.’

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.