If you’ve been following financial markets recently, you may know that gold is in the midst of an unprecedented rally. Although I don’t believe in nearly all technical analysis prognostications, some technicians are predicting gold to spike to $6,500 an ounce. Is this based on sound reasoning, or is this just ridiculous speculation?

The U.S. government will be sending out another stimulus check in the month of August. Unemployment benefits of $600 a week for most Americans will either continue until the end of the year as in the Democrats’ proposal or at nearly $500 a week for most Americans if the Republicans get their way. Whatever ends up happening, we are talking about a multitrillion-dollar expansion of the national debt.

This increase in debt means it has to be financed somehow. Who is buying government debt? Well, the Federal Reserve is buying a lot of it. This means there is a massive debasement going on in the U.S. dollar. This debasement means globally, currencies will rally against the dollar and the dollar will fall against commodities priced in dollars, such as gold. That gold is a safe haven asset also makes it desirable.

So what’s the end game here? The pandemic needs to end or at least begin to wane for the economy to pick up so that firms begin to hire workers again. After workers are hired, wages get paid and payroll taxes again begin to come in. Short of these steps, the largest quantitative easing exercise in America’s history only gets worse, and this means gold will keep rallying.

Therefore, the question is, again, when does the pandemic end? Do you believe the vaccines currently in clinical trials will work? Will they be distributed globally, quickly and efficiently? Or will it take many years for the world to be rid of COVID-19? If you believe the latter is true, gold will keep rallying. If you believe the vaccines will work, gold will reverse its course and this rally will be short-lived.