The statements made by the Federal Reserve last week drove speculative traders out of the gold market. But Sprott CEO Peter Grosskopf said gold's potential for long-term investment remains unchanged, as government spending and global debt will force central banks to maintain low interest rates in the near future. He added that a massive drop in gold, even as much as 5%, will be a great buying opportunity.

Grosskopf explained that government spending creates a unique inflationary environment, while government support and rising unemployment benefits are forcing companies to raise wages to attract workers, which, in turn, increases the cost of input resources. All this threatens economic growth, which has been strong this year, thanks to the relaxation of some restrictions related to the coronavirus pandemic.

The obvious slowdown in the housing sector seen in the latest data is a sign of how quickly economic recovery could slow.

Grosskopf also reminded that investors should not only focus on interest rate expectations, but also on real rates. He said that even if the Federal Reserve starts raising interest rates in two years' time, rising inflation will keep real rates negative.

The Congressional Budget Office (CBO) even confirmed the low real rate regime, saying that by 2050, 10-year real returns will rise 2.6%. As for real interest rates, they will climb 1.1% by 2031.

So, even if gold prices remain below $ 1,800 right now, Grosskopf believes they could reach $ 2,000 by the end of the year.