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David Rosenberg: This Is How We Get To $2,750 Gold
As Rosie dedicates more and more attention to gold, his latest piece demonstrates why the melt up in gold will make the surreal "lift each and every offer" move in stocks seem like child's play.
Another reason to be bullish on gold is the recurring trade spats. Indeed, this is good news for the commodity complex as security of supply resurfaces — see China Attacks U.S. in Fresh Trade Spat” on page 2 of the weekend FT. If it’s not Chinese-made tires fingered by an increasingly protectionist U.S.A. one day, it’s steel pipe the next. This latest anti-dumping measure by the United States is facing a severe rebuke, as per the press reports, in China.
In addition to these trade protectionist actions, there is also the matter of more stimulus measures being undertaken in a mid-term election year at a time when the Treasury is expanding its debt issuance to new records right across the maturity spectrum. All anyone needs to do is have a look at the article Congress’s Blank Check For Housing in the weekend WSJ — to see this happening at a time of 10% budget deficit-to-GDP ratios, had indeed become a bottom-less fiscal pit.
Since the USA will not default, not raise taxes nor cut spending, the only logical recourse will be to print vast sums of U.S. dollars to fund this surreal foray into deficit finance. In other words, reflate. As we keep on saying, under Dr. Bernanke’s tenure, the monetary base has risen twice as much as nominal GDP has and the two lines continue to diverge. At the same time, gold production peaked a decade ago. It’s all about scarcity of supply, and as Sri Lanka’s central bank just reminded us, and India before that, there are buyers with deep pockets lining up to diversify into bullion. Here are the ‘what if’ realities stack up:
- If India were to lift is gold share of FX reserves from 6% to 20%, where it was during the strong U.S. dollar policy days of 15 years ago, we estimate that gold would go to $1300/ounce.
- If China were merely to copy what India just did and raise its share to 6%, then gold would go to $1,400/ounce, based on our in-house analysis.
- If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity.
Now gold is in a secular bull market and by no means are we suggesting that everyone line up at the vaults right this second — for the time being, it is too much front page news and a crowded trade, so it won’t hurt to wait for a pullback and get in at better prices (as an example, see Inside the Global Gold Frenzy on the front page of the Sunday NYT business section).
You see, when Bob Farrell wrote “The 10 Market Rules to Remember” he made sure that they were interesting reading and in doing so, some people get a laugh out of Rule Number 9 (“When all the experts and forecasts agree, something else is going to happen”) and Rule Number 10 “Bull markets are more fun than bear markets”). Nevertheless, they are just as important as the other eight rules. The obvious reason why Rule 5 is important (“The public buys most at the top and least at the bottom”) is that it also captures the inverse relationship between sentiment and the position of the market (ie, bullish sentiment peaks when the market tops and turns down and bearish sentiment peaks when the market bottoms and turns up). All that “agreement” adds enormous credibility to conventional opinion, just when it is most important to envision and prepare for the contrary. Lately, (you) have been experiencing shock at the policy responses by the U.S. government relative to the credit crisis and economic slowdown. Policies that encourage increased indebtedness by households and businesses are combined with massive deficit spending and Federal Reserve balance sheet expansion and the latter particularly, has enormous inflationary implications while exerting downward pressure on the value of the U.S. dollar. The problem with this understanding is that most everyone agrees.
To wit: According to Consensus Inc., bulls on the U.S. dollar are currently at 28%. Bulls on Treasury bonds are currently at 59% after hitting a low of 21% in early June when rates peaked in this cycle. Bulls on gold are at 78%. Bulls on the stock market are at 74% and they haven’t been that high since October 2007. It has become a crowded trade, and something very contrary to the expected outcome is likely to occur, at least over the near term.
Walter Murphy, our favourite technical analyst, expects a substantial rally in the U.S. dollar and a decline in gold over the medium term, even if those moves are counter-trend. He thinks that the war is on inflation, but the battle is deflation and this is a bear market rally in stocks. We have said repeatedly that it seems too early to call for an economic expansion with so much unfinished business in the process of household balance sheet repair. And, keep in mind that the deflationary forces emanating from the household are much greater than the inflationary forces associated with government stimulus, at least so far.
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Tyler, stop posting things and get in on this once in a lifetime opportunity to double/triple your money in a short time because this thing window of an opportunity aint gonna last. You might as well do it because we all know that the USD will be worthless and everybody is building up their account to counter the effects of rampant future inflation. If you dont participate now, a 100 USD wont buy you a loaf of bread in 2 years time. So stop typing and start trading!
$2,750 Gold, my ass.
He couldn't even sell it for 50.
http://www.youtube.com/watch?v=Gk5aRIz17fk&feature=player_embedded
Yes, some bozo comes up to you in the street and asks you if you wanna buy his gold coin for 50$ -that smells weird. But you can always weigh or/and bite it. They wouldn't wanna do that. Even for 5 fucking bucks. Gold only holds as much value as people are willing to give it. It was valuable for 5 thousand years, but today people lost their fucking minds and brains.
His video proved many Americans are still clueless about gold. The Federal Reserve's job of erasing gold from normal Americans vocabulary is very thorough. If he tried that in Asia, Germany, France, Switzerland, India... he would sell it many times over and they would be asking for more. What his video shows is that the USA's central bankster's have their dollar product scam fully entrentched.
Funnier still, it makes one wonder if Americans realize how much the CAD is worth and what is happening to their precious FIAT US dollar.
yeh and who are they going to call when they are cold and hungry? ghost busters???? got guns and ammo?
For the FED, 50$ is way too high.... They can print notes for .025. If they print $100 notes, they can pick up gold for .275 per ounce..
If the FED wants gold, why can't it just buy it? :)
What an asinine example. Would you buy ANYTHING off the street from someone?
What if that guy offered stock certificates in XOM? Would you buy those off the street from some dude with a video camera?
Worthless post.
just bite it for god sakes, that is what miners did when panning. if you take 1oz of pure gold Canadian is .9999 or now .99999 the purest in the world, and press it, it could cover an acre. that is how soft real gold is. if it was a scam and the 2 ppl knew the real price and knew real gold, they should have asked to bite it. if he refused - scam. genuine-ok. i guess im just a smart fucker that knows better. yes there is alot of scammers, but from my own research-he is spot on-most are ignorant.
$2750 seems quite conservative to me in view of 96 years of calculated ponzi looting accelerating by the day. People are losing purchasing power not their minds. It would behoove everyone to ignore the MSM coverage.
Jesus has spoken. Now the end can't be far off?
Bird man was laughing at New World Order Resistance man.... on your youtube video.
http://www.youtube.com/watch?v=Gk5aRIz17fk
We can categorize ZeroHedge in the New World Order Resistance camp!! Getting laughed at by crazy bird men trolling on Venice Beach. LOL!!
oh oh ... you gonna be in trouble when chumbawamba sees this ..
So much for a "gold bubble". I read recently that Jason Hommel was at a gun show and could not sell silver rounds to the gun crowd, many of who inquired why anyone would want to own silver. That was the most bullish news I had heard all year so I went out and bought 3,000 ounces.
So much for a "gold bubble".
People most likely thinks that is was a TV show trick or some sort of joke.
If he gave the people proof of purchase and how they can sell it at any bullion dealer for a 1020% profit? They would of purchased that coin without question.
As others have observed, would you trust a (likely con) man on the street, with a mike? (I mean, am I allowed to open carry in that state?)
That said, my other note would be what time of day was this, sunrise or sunset? Methinks this Tice/Dice guy made sure what time of day he was there.
I would have loved to have been there, but, I would have went by subjective hand-weighing and the sound, and then again, I'd be thinking, "hmmm, if I'm out $50.00, there goes 3 troy's of Ag, or all that hard red wheat...
Since the USA will not default, not raise taxes nor cut spending, the only logical recourse will be to print vast sums of U.S. dollars to fund this surreal foray into deficit finance. In other words, reflate.
Printing IS default, and I genuinely don't understand why otherwise well-educated people discuss it in any other manner. No wonder the public doesn't understand what's happening.
Jesusonline,
Does not the dollar only hold as much value as people are willing to give it? What happens when that confidence breaks down. Look at history and you will find the truth.
Paper with some ink or something that takes time, energy and money to produce?
Unless we go back to the stone age (because any other age valued metal; bronze, steel, etc) gold will be worth more than fiat paper.
Now is the time to get your house in order.
"Now gold is in a secular bull market and by no means are we suggesting that everyone line up at the vaults right this second — for the time being, it is too much front page news and a crowded trade, so it won’t hurt to wait for a pullback and get in at better prices (as an example, see
Inside the Global Gold Frenzy on the front page of the Sunday NYT business section). "
I wonder: are we now witnessing an engineered (very public) gold frenzy as an attempt to stymie the real one? Managing expectations by way of painting the tape through a "gold bull", which popular MSM pundits can then point to and say "ok, we had our gold bull, now paper-based risk assets are the game again". Embrace, extend, and extinguish. So many "investors" rely on TA and other foolishness that a move like this by TPTB is to be expected, another arrow in their quiver of tools, just like the phony recovery is a means of trying to manage expectations and change market psychology. I have always believed they would attempt to burn out the gold bull.
I do not believe they have any chance of success if this is truly what's going on. Long term, I am as certain as I can be that the buck is dead, and by long term I mean less than a decade. I am holding my PMs with strong hands, and will continue to do so until I see some reason for a genuine recovery (fiscal sanity, troops home from ME, Eric Cantor thrown out of Congress). I'm just pondering here about the current media frenzy. The man on the street still doesn't know shit about gold and silver.
IF
In reverse thinking, US$ is commodity, gold is money.
Divides States is right,
You guys out there need to get involved. Gold is good , but personally I think Silver is better. Crowded trade my ass. It is crowded but that's what you get in a speculative blowoff top market.
Don't waste your time intellectualizing. Get yourself some risk asset exposure and sail into year end a happy trader.
Just one trader's opinion.
4 years ago a real estate agent told me the EXACT same thing about investing in real estate.
"Crowded, my ass. You'd be foolish not to flip this house in a year or two for a handsome profit."
Is real estate not a tangible, physical asset? Like gold, it is limited due to time required to build new developments. And what about available land? Japan even has limited land, and real estate tanked over there.
You gold bugs need to sit back a moment and think real hard as you all jump on a wagon headed for a cliff.
Well, firstly Gold is a very different investment from real estate in terms of liquidity and investment size. Getting in and out of real estate is alot harder than punting gold futures or etfs and it requires a much higher upfront commitment of time and capital. So, there is a huge difference between the two.
Secondly, in bull markets, there is always a stage where everyone is bullish and markets can continue onwards despite that for a long time in both duration and price. Try tech stocks in the US for a recent example. Fundamentals may or may not support the move but it can still be substantial and lead to significant gains.
Thirdly, I am a trader so I trade the position as I see it. I am not necessarily holding for five or 10 years but there is a confluence of factors which could lead to a significant rally over the next few months.
Finally, overall, as a trade to the end of the year and possibly in to the first couple of months of next year, Gold is a good bet, as are all risk assets. In my opinion. And I have good company, too, if you look at Paulson, Greenlight and Tudor.
I've wondered the same thing. Gold fever sounds like the top of a bubble except for one thing. Gold isn't really an asset. Gold IS money.
And the reasons for golds appreciation have nothing to do with a bubble. It has everythingn to do with the moneatry policy of too many central banks across the world. People are simply trading their paper money for which they rightly have no confidence for real money that they don't need to have confidence or no confidence in.
It has never mattered if you have or didn't have confidence in gold. It has always had value.
Real Estate is an investment. Gold is money. Fiat currencies can be debased at any point and in any amount. The only limit is the number of digits printable on their face. 100 trillion dollar notes are easily possible but gold cannot be copied, or printed. It's hard to get and there aren't going to be any large amounts of gold entering the market at the whim of a government. In fact it will probably be the opposite as responsible governments look to acquire gold as backing for their paper currencies.
All that being said I don't think gold will continue on it's upward move without interruption. The dollar also will not continue is long slide without a pop up either. The Fed will raise rates and the dollar will rally in a big way and gold will drop in a big way. The problem will be that gold will resume it's upward run bigger and faster after this move and the dollar will ultimately crash.
I'm not worried about those potential moves because I am prepared for them if they come. If not, I will continue to purcahse PMs on any dips in price and move out of any dollar denominated assets.
If gold is money then so are doorknobs.
Are doorknobs divisible?
No. One half of a doorknob is not worth half of a full doorknob, it is junk.
Are doorknobs rare?
No. They are manufactured cheaply and rapidly.
These two points make doorknobs unsuitable as money.
Is gold reaching a peak? msn money has a bullish article on gold today which may lead the masses into buying it....
Wow. The battle lines on gold over the next few months are well entrenched. There is a loud and smart voice that says this is a trap and there is another that says there is a new paradigm in gold forming.
How about this: A blow out move to 1,200 causes CB's to back off the QE stuff. Backed into a corner, Bernanke ends the balance of the Agency POMO buys. Gold goes back to 1000. And everything else is in the crapper.....
Good for Vol players.
How is Bernanke going to stop buying agency MBS??? Do you know where agency MBS spreads will go if he really stops buying? We would be at a 95% FHA market in days (because Ginnie's, with full faith and credit backing, actually have a bid in the non-Fed market).
Bernanke will not let that happen. If he stops buying, it will be for days, maybe a couple weeks, it won't be permanent. he has no choice anymore.
There is nothing stopping the dollar destruction, and thus the price of gold.
I have said it before, I will say it again: despite the fact that the runaway inflation in the housing market got us into this mess, amazingly 99% of market watchers still don't understand the MBS market, and the implications of what happens in that market.
Simply fucking amazing.
"Do you know where agency MBS spreads will go if he really stops buying?"
Where they should go as determined by THE MARKET
I was thinking about 6 5/8 for a 30 year.
Housing rally????????
Agora Financial columnist Ian Mathias in The Two Things That Really Matter yesterday repeated that "the real barometers of this recession are employment and housing… and both fronts aren’t looking so hot." According to Mathias:
…The official unemployment rate jumped from 9.8% to 10.2% in October… That brings the total to 15.7 million officially unemployed Americans, a record 35.6% of which have been out of work for more than six months... The U6 unemployment number — a record 17.5%.
“Help-wanted advertising is contracting,” reports John Williams of Shadowstats, with one of his preferred employment metrics. “The Conference Board’s newspaper help-wanted advertising index for September (a leading indicator to October’s employment report) fell to a new record low of 9, from the prior low of 10 that had held for the preceding four months. This new 58-year low is a very negative signal for background employment conditions.
“While some of the weakness in this index of recent years has been due to ads shifting from newspapers to the Internet, near-term relative changes remain significant indicators of pending employment activity. The Conference Board’s online help-wanted advertising also has been in monthly decline, with year-to-year change for new ads down 24.6% in October, versus an annual decline of 25.7% in September. The declining online data are leading indicators of activity to both the October and November employment reports.”
But lest you think we only tell one side of this story, a glimmer of hope from today’s jobs report: Temp agencies added 34,000 jobs in October, the first statistically notable increase since the recession officially kicked off 22 months ago. Temps have been decent leading indicators for the employment scene in the past, so we’ll keep an eye on ’em.
On to the other real barometer of the recession… the housing front ain’t pretty this morning, specially Fannie Mae’s ugly mug. The lender of last resort (not coincidentally now the largest dealer of U.S. home loans) turned in a $19 billion quarterly loss yesterday. Surprise, surprise… its government receivership has made Fannie WORSE, as it is now forced to accept more bad loans and participate in foreclosure prevention programs — the two major sources of its third-quarter loss.
Moments after its earnings announcement, Fannie asked the government for another $15 billion bailout. It’ll get it, which will bring its taxpayer tab up to $60 billion. The company is eligible for up to $200 billion in bailout bucks before further congressional approval is required…
How desperate have Fannie and the federales become? Fannie Mae introduced a nationwide “Deed for Lease” program yesterday, where homeowners about to be foreclosed can transfer ownership to Fannie Mae and then rent the property from a third-party management company...
Walter Murphy, our favourite technical analyst, expects a substantial rally in the U.S. dollar and a decline in gold over the medium term, even if those moves are counter-trend.
I have a problem with the oversimplification in this statement:
Ofcourse gold measured in us dollars would be affected by the value of the currency itself, in euros gold is not even very close to it's all time highs when the euro was weak compared to the usd because of the flight to us dollars that took place during the 2008 / 09 crash.
However in terms of all fiat currencies i can't see gold declining even on a medium term counter-trend move, due to it's unique monetary properties.
You can't really compare gold to other commodities in this way, while it is true that investors would have no problems in reducing their oil positions, or their copper or cotton contracts in a similar environment, the question is, would they be equally willing to depart from their physical bullion in their personal posession, the coins in their pockets or bars in their vaults? I don't think so.
The paper markets don't really matter anymore, even if the GLD and SLV would drop 90% tomorrow morning, you would still have to pay about $1110 for that maple leaf in ur store. The paradigm shift has already happened, ppl just haven't noticed yet.
If people start buying gold, where are they going to store it??? If you store it at home, theres a good chance you are going to get robbed. If you store it in a safety box, the banks basically have custody of it for you and you trust those effers anymore? There is no good place to store gold. I prefer commodity currencies like the AUD and CAD which are also being derived off the USD, imho. Moving to those countries would definitely be the wisest thing to do, though Canada is in too close proximity to the soon to be 'Damned States of America'.
Hand held GPS: http://www.consumersearch.com/gps
Bank of Gaea.
No, I'm not kidding.
Where would people store it? 100 gold US eagles, $100,000, would be a stack of coins 28.7 cm (11.29 inches) tall and 3.2cm (1.26 inches) wide. If you can't find a safe place to hide something 1 foot tall by 1 inch wide you probably shouldn't be investing anyway. Maybe people could ask the stoner kid down the street where he hides his bong???
Yeah you go ask your dog to sniff it out and dig it back up for you. Anyhow, you try bringing your gold everywhere you go, but I am sure at some point you wished you wouldnt have to carry it around while you fight off bandits. Are we actually going back to the days of the wild wild west but with a future setting?? I am getting myself a Hummer, maybe this gold rush will revitalize sales of it.
100 oz of gold weighs in at 6.8 lbs. oooh, a whole 6lbs for $100,000 of gold. Yeah that would get tiring. A stack 1' by 1.25 inches, weighing 6 lbs! My gosh you'd need a hummer with one of those fancy hydraulic wheelchair lifts.
You could easily store tens of millions of dollars of gold in a simple gun vault or similar safe...
Bingo.
The time you want to have some gold is when there is no price.
When no one will sell any for any amount of FRN's.
http://www.youtube.com/watch?v=7ubJp6rmUYM
I get the GPS angle, but, I have to research the protocol and so on, could our blessed government thwart access to certain receivers, or by making changes to firmwares, etc...?
You can rent a storage locker, get climate control and you get an extra locked door. Just be quiet about it and hide it in a box of old socks. Safer than the bank, or under the bed. Gold is fine, but silver is set to rise much faster and farther when paper money crashes. You can put a lot of silver in a storage locker.
Why should worry about the price of paper gold?
Blah, blah, blah, all this talk about crowded trade this and contrarian that.
Let me make it really simple: $1.25T. That is how much Bernanke has committed to printing to buy agency MBS, and he ain't done yet.
He won't be able to stop that printing, so as TD points out, our dollar is going to be increasingly backed by agency MBS.
If anyone is a dollar bull, or a gold short, PLEASE lay out a scenario where Bernanke stops buying agency MBS anytime before 2011.
Otherwise, any analysis about the dollar or gold is missing THE key point.
Wouldn't a good old fashioned World War fix that?
Seriously.
If anyone is a dollar bull, or a gold short, PLEASE lay out a scenario where Bernanke stops buying agency MBS anytime before 2011.
Long USD short term--always long gold--
It's not really about what the US does--
It's more about what other country's will do--
And that--is to compete with devaluation--
As in--print like crazy--
I agree that, relative to other fiat currencies, the USD could go anywhere. Though it looks like some central bankers are actually responsible (Australia, India, etc).
But the dollar relative to the Pound? Two awful choices there.
Give me a break on this claim that the Australians are, somehow, more credible than the Americans. Ridiculous. The Aussie government has the exact same stupid policies as the U.S. gov. If you bother to look it up on the internet, you'll find that the bloating of Aussie RE is far worse than in the U.S.A. The average Aussie house costs a lot more and went up a lot higher. The average Aussie family has at least as much, or more, debt than the average American family. The only difference is that Australia has 1/15th the population living on a landmass almost as large as the USA. So, they've got huge excess amounts of commodities to sell to the world, whereas the Americans don't.
I brought my gold to the grocery store...I could not buy anything. Apparently gold is useless except for a store of wealth.
SHOCKING!
Take your GM and Worldcom stock certificates to the store and see what you get, clown.
Most of your posts are dumb. Ofcourse you won't get anything at the store with gold right now, people are forced to use paper currency and a majority of people don't even understand how worthless paper money is or how much gold is worth. Even our change is only worth a small fraction of the real face value.
So please stop making obnoxiously dim-witted remarks. If you want to sell your gold and silver I am sure you will find plenty of educated buyers.
I dunno guys, this gold "stuff" seems all too obvious to me. When everyone runs in one direction, I generally run the other way.
Think about it--Is there any reason why "someone" would want us to think this?
something just doesn't quite smell right.
Faber thinks the dollar's going up & gold's going to $900.
He's often right but not always. This is a sort of wake-up spike.
Who is all running in one direction? I can almost guarantee you that > 90% of Americans own no physical gold.
[sarcasm]You're right, no one in the US has any gold jewelry.[/sarcasm]
I'd bet 99%.
did Rosenberg have anything to say about PMs say in 2005?
Bill Bonner called it at the turn in 2001. so's you know
A couple of scenarios where the dollar will rally against the Fed's wishes and lustful desires.
1. The upcoming Alt-A, CRE, and other real estate defaults will cause further bank losses, not only in US but Europe also. This MAY cause governments in Southern and Eastern Europe to de facto default. This will put pressure on the Euro. In fact, Friedman said that the Euro, because it is not supported by a single govt. and culture like real governments are will fail. Will the Germans, Dutch etc. continue to bail out the Southern and Eastern Europeans? IMO, they will get tired of it soon enough. They are not one people, they have not melted into an amalgamated melting pot. As the Euro becomes risky, the dollar carry trade will fail and the dollar will be seen as safe vis a vis the Euro and other fiat currencies.
2. The Chinese, Japanese and rest of the world get tired of having their bonds degraded, raped and debased. They and the bond market will markedly demand a higher yield on the 10, 20 and 30 year US bonds. This will kill the dollar carry trade.
Will this happen, maybe not, but can it. Definitely.
Critique welcomed
Under the scenario you outline there would be an obvious flight to safety similar to what we saw last year. Any unwind of the dollar carry trade means the dollar must go up in value as investors unwind positions. Borrowing in dollars and buying up foreign assets only works until it doesn't. Then, like a rubber band it snaps back with great force.
I think you're right long term on US bonds, but it's too soon for the death of the dollar. You're anticipating what's likely to happen in 10 years or longer. World Governments are tired of seeing their US assets get trashed, but they have no choice. Our trade deficit must be financed to keep the world from plunging back into depression. In China the threat of civil unrest and massive riots against the Government is a very real concern for TPTB. Yes they will lose money, but they are gaining in technology transfers and development at our expense.
I think the creativity and collusion of central bankers will keep the ponzi scheme going until the entire world financial system blows up in one spectacular explosion.
Double post...
This is actually pretty bearish for gold prices. Backs up what Rogers was saying: $2000 in the next ten years. OK rate of return, around 8%/year.
Not anything to get really excited about. Certainly not bubblish, or "to the moon" or hyperinflation.
You forgot to mention the effects on inflation. If thats the case, it may be very bearish. I think Rogers is basing this on the fact that the USD will keep getting pummeled for years and years to come.
How can Americans not understand that they are getting paid in USD and paying for goods and services (oil, food etc) based off the USD?? this is a double whammy!. there is something drastically wrong in this world right now.
Gold has outperformed the S&P and the Lehman Agg, in any combination your little asset allocater handbook recommends, for the past 3, 5, 7, 10, 12, and 15 year period. In gold terms, there has been no return in 15 years. Financial assets, and their hawkers, have added no value since Bill Clinton's first term.
I still don't see how people claim that gold is a crowded trade. Here is some math, as data helps remove some of the fog:
US population- Approx 300 million.
If 1% buys 1 oz of gold, thats 3 million ounces ($3Billion)
The Comex Dealer inventory = 2 million ounces. If 1% of the US population decided to buy 1 gold coin, then the entire comex dealer inventory would dissapear.
China's population is 1 billion, so 1% is 10 million. If 1% of China's population decided to buy 1 oz of gold that is 5 times the comex dealer inventory of gold.
Do you see where this is going? Is 1% of the populace a crowded trade? This doesn't even include managed funds, what if hedgefunds decided to hedge their portfolios with 1% allocation to gold?
The top 10 hedge funds reported 1.64 Trillion in assets. If just these hedgefunds increased there gold assets (assuming they had some) by 1%, that would be $16 Billion, or 16 million oz of gold, 8 times the comex dealer inventory.
If 1% of US citezines, 1% of Chinese citizines, and 1% of the assets of the top 10 hedgefunds went into gold, that would be 28 Million ounces of gold, 14 times the dealer inventory at COMEX and roughly 25% yearly production.
Crowded trade my left foot.
The question now is how much of that 2 million ounces is tungsten?!!!
The question now is how much of the Comex's 2 million ounces is tungsten?!!!
I doubt there is any W in 1 oz. coins.
Great post friend.
Most valuable comment yet (per oz).
For silver, it's even more ridiculous.
The mania is at fever pitch now and although some more speculative gains are imminent, this whole hysterical move will end with oil. Billions has been pumped into ETFs and futures, which are only continuing because the anti-dollar trade has not hit a headwind.
The gold bulls are in some emotionally-biased, collective frenzy of short-sighted investment understanding. they talk of fiat collapse, yet they can't see far enough ahead to understand the consequences. This is the south sea bubble, the internet mania, the "in too early" peak oil move.
Last month's 200 pip move in the U.S. dollar sent gold down 50 bucks, showing the pure speculation that exists above 1000. Markets and gold bulls are wallowing in their own self-righteousness with no disregard for event risk.
Tyler,
is there a financial dictionary of financial terms used here? I would like to know what PM, POMO are. Thanks.
So, if all 3 scenarios occur the gold price would elevate by over $2,000?
That is to say: The effect would be cumulative?
1. What's the consensus on the aggregation in value.
2. What's the likelihood of each/all scenarios happening?
* If India were to lift is gold share of FX reserves from 6% to 20%, where it was during the strong U.S. dollar policy days of 15 years ago, we estimate that gold would go to $1300/ounce.
* If China were merely to copy what India just did and raise its share to 6%, then gold would go to $1,400/ounce, based on our in-house analysis.
* If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity.
Oi you lot, just supposing a man with a camera comes up to me here in England tomorrow - or next week in Germany or Hungary, where 'll be - and offers me what he says is a 1oz gold coin for fifty dollars. What should I do?
I suppose I could offer him 55 USD if he'll come with me to a jeweller's shop I trust and we pay for a 5 dollar assay.
Or is there a simpler way? Should I go round ready to test the volume a 1oz sample of the sweat of the sun god, seeing if it matches the periodic table entry? How much volume is that?
Or the tears of the moon goddess.... if the camera man is offering me pure silver so he says, how do I check?
Serious question to all concerned citizens.
Without the $5 kicker for the jeweler to acid test the piece you should pass.
There is a flood of fake coinage being imported from China. Coin World had a multi-part series on this recently. Tungsten can be substuted for the gold in most pieces.
There is little enforcement in this area. If you don't know who you are buying from -- don't.
As Tusser said, "A fool and his money will soon be parted." Education and knowing a coin when you see it are the first defense. A hefty dose of skepticism is the second defense.
Fantastic piece from D.R. (not the chipper, the technician's strategist); thanks for highlighting it for us all. Great stuff, as always from D.R.
- WRONG....! WRONG.....! and WRONG AGAIN.....! Your are assuming, that the rest of us in this small planet would idly stand by chewing on our toe nails. First case scenario, well over 2 grand, second case scenario 3 to 4 grand and the last, perhaps as much as 10k per oz.
ciao, EconoliciousJust wanted to say that you have continued to be a BALANCED observer of the financial markets. PLEASE continue to do so. This stuff is tremendously educational, even to grizzled investment professionals like I.
Where are the pullbacks? I have been waiting to buy more since 980/ounce. What the Hell. There are supposed to be violent corrections in gold, but havent seen any. I think i will be the guy buying at the top tomorrow morning.
.. think you will be too! Having read your thoughts, may I suggest waiting T + 3 (days), where T = this quite possibly prescient self-analysis.
It looks like the Euro may be moving lower against the US dollar over the next months and that should cap gold upside for a while.
It all has to do with interest rate differentials and relative economic growth. The US growth is accelerating.
time123
admin: http://invetrics.com
Today I bought a little gold and more silver, including silver eagle dollars, Mercury dimes and Standing Liberty quarters. A half ounce in 1/10 oz gold coins. Too expensive, but I figured it's good insurance in case things get out of hand.
http://www.americansilvereagles.com/Uncirculated_Silver_Eagles
Try www.apmex.com or www.onlygold.com. They're prices are a good bit cheaper than the site you linked to.
www.tulving.com 11:37PM EST Silver Spot = $17.35
1oz 2009 Brilliant Uncirculated 2009 Silver American Eagle (500 coin min.), Spot+$1.69 per coin. ($19.04@). Shipping Included.
You realize you're paying (quite) a premium, from whomever, for such coin? Consider 90% silver in form of dimes or half-dollars first, then consider 10/100 oz, just my .02.
Also, Franklin's Moneychanger, sign up for the daily email if you are outside TN. www.the-moneychanger.com
Isn't Wall Street Pro a silver vendor?
In case you were wondering:
http://www.marketwatch.com/story/ten-investing-rules-that-will-help-you-...
Try Ebay. Serious. One of the best places I've found for silver dimes. You pay a premium but not much, in fact it's less than the local pawn shop/coin dens around here.
Wow, I've found Ebay to be the absolute worst in regards to markup, plus, you trust who sells on there? Or are you talking numismatics, no one here is interested in those, that would be like stocking up on antiques.
You do walk in the pawn shop with your piece under your coat, eh? 'Cause with that kind of money on your person in some of those vicinities...
Yea actually I've found quite a few extremely reliable sellers on Ebay. But this is for rolls of silver dimes, I dunno what these numismatics are. Once again I think the ZH paradigm is exposing itself, I honestly have no clue what that word even means.
I get silver dimes because I'm not getting a silver bar stamped by someone that may or may not be lying, and worst case scenario they are worth the 5c a piece that is printed on them by the US Gov. Although the silver will always be worth more, and I know the exact content of those dimes. If someone wants to melt them down later that's on them. It'd take way more than the couple bucks you are gonna make to fake a pound of silver dimes. But I'm also smart enough to check my seller's ratings, apparently you aren't.
I'm from CO. There's no reason to ever walk anywhere with a piece, including pawn shops. Hell I've been approved for a handgun from a pawn shop after 17 minutes out here, GO GO CBI checks. Everyone knows everyone else has a gun or is close to one if they have over 500$ on their person (and/or equivalent drugs). Not sure where you're from, but guns are a plenty out here, and that makes me feel safer if anything.
I would also like to know what PM, POMO are. As a newbie, I am trying to learn about financial matters, but don't always understand the abbreviations and this makes it difficult. Thanks.
Thanks for the great reading, we buy gold in a recession. I will pass this on to our ira clients to read-
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It looks like the prices this article speaks of have already come to pass. So what happens when we get to $2750 gold? Personally I buy gold whenever I can and think that it's a great investement. With the turbulence right now in the economy and the problem with the powers that be creating money out of thin air what do you think would happen. My question is...is $2750x@ gold out of the question and what happens when we get there. This train doesn't seem like it's slowing down any time soon.