Gold at $10,000? Bullion Buff Barisheff Makes the Case

In the case of the U.S., the federal debt and the price of gold have thus moved in "lockstep," Barisheff says, and he projects this correlation to continue as long as U.S. debt remains on an upward trajectory. He says U.S. debt is expected to reach $23 trillion (from its current $15 trillion level) in 2015. If the current relationship between public debt and gold holds, that implies a gold price of $2,600 per ounce. "However, if history is any example, it's a safe bet that government expenditure estimates will be greatly exceeded, and the gold price will therefore be much higher," he said.

Indeed, he notes a Congressional Budget Office forecast that U.S. public debt will reach an unsustainable 101% of GDP by 2021, and says that official current debt–"if the U.S. government used the same accrual accounting principles that public companies must use" and thus include unfunded liabilities like Social Security and Medicare–should actually exceed $120 trillion. At more than $1 million per taxpayer, "this amount is impossible to repay," he said.

Frightening as this scenario is, Barisheff sees increasing debt as the most likely course since the other options are all economically or politically unrealistic at this time. Recession-poised economies are not likely to see sustained economic growth; austerity measures will in the short-term reduce GDP and are politically unpopular; and debt default would make it impossible for cash-strapped governments to raise needed funds in the capital markets.

This leaves further debt issuance and currency creation as the most realistic option. And that, Barisheff argues, implies that the U.S. dollar and other currencies will continue to lose purchasing power to gold.

Barisheff says the U.S. dollar and British pound have lost over 80 percent of their purchasing power against gold in the past decade. Going forward, he foresees significant gold purchases on the part of pension funds and insurance funds as a means of diversifying out of financial assets such as stocks and bonds.

The bullion-selling investment company CEO recommends physical gold ownership as opposed to mining shares, ETFs or other proxy forms of ownership. While he could not be reached by AdvisorOne to explain this preference, commenting to his Empire Club audience he rhetorically asked: "In the case of fire, would you rather have a real fire extinguisher or a picture of one?"