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Three Scenarios For Gold

Tyler Durden's picture


Even though we have presented comparable scenarios looking at the coverage of the US money base in gold terms previously, aka "gold coverage" ratio, including once from Dylan Grice, and once from David Rosenberg, now that we have drifted into a new, previously unchartered and very much open-ended liquidity tsunami, it is time to revisit the topic. Luckily, Guggenheim's Scott Minerd has done just that. Not only that, but he presents three distinct gold pricing scenario, attempting to forecast a low, medium and high price range for the yellow metal.

To wit: "The U.S. gold coverage ratio, which measures the amount of gold on deposit at the Federal Reserve against the total money supply, is currently at an all-time low of 17%. This ratio tends to move dramatically and falls during periods of disinflation or relative price stability. The historical average for the gold coverage ratio is roughly 40%, meaning that the current price of gold would have to more than double to reach the average. The gold coverage ratio has risen above 100% twice during the twentieth century. Were this to happen today, the value of an ounce of gold would exceed $12,000.” 

Keep in mind, the $12,000 price is based on the current monetary base. When this number rises by $2 trillion (at least) through the end of 2014, the upside case of gold will be orders of magnitude higher.

And now you know why bickering over a few hundred dollars here and there is largely irrelevant, and in fact one should be delighted if gold can be purchased at as low a price as possible. Why? Because one thing is absolutely certain: in order to keep the ponzi going, with every other sector at peak leverage, including household, corporate and financial, and real assets already massively encumbered by debt, the only real indirect buyer of gold will be the world's central banks, by means of diluting the existing paper supply. And whether or not the New York Fed, or some gold cartel, are actively pushing the price of gold lower, this is very much irrelevant, and in fact continues to be a welcome diversion, one which allows for the artificially low entry prices into gold. Because one day, gold will revert to its fair value, and so often happen, that is when its will go back to 100% "coverage" as faith in fiat evaporates. At that point whether one bought gold at $1000, $1500 or even $2200 will be absolutely irrelevant.


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Wed, 10/17/2012 - 13:51 | 2898486 New Revenue
New Revenue's picture

Barbaric relic, bitchez!

Wed, 10/17/2012 - 13:56 | 2898506 redpill
redpill's picture

The price of gold will be violently contested.  It's a tightly wound spring held down by those who cannot fathom allowing the story to propagate that a spiking gold price would tell.  Eventually it will become unstoppable, and when that happens, hold on to your asses.  Don't sit there and be giddy that gold is spiking, instead use that canary in the coal mine properly and get your economic contingencies in order because it means the shit is hitting the fan.

Wed, 10/17/2012 - 14:13 | 2898534 Pladizow
Pladizow's picture

Brodsky refers to it as the Shadow Gold Price.

Rickards covers this thouroughly in Currency Wars.

Maloney also covers this extensively in his book.

It's how gold was fixed at $35/oz at Bretton Woods.

Gold: No better place to store your labour!

Wed, 10/17/2012 - 14:39 | 2898627 BaBaBouy
BaBaBouy's picture

Manipulation Machine Notwithstanding, GOLD $50K ...

Wed, 10/17/2012 - 14:42 | 2898637 Stackers
Stackers's picture

Damn it. All I have is a few hundred pounds of silver.

Wed, 10/17/2012 - 15:24 | 2898757 Pseudo Anonym
Pseudo Anonym's picture

not too worried.  when gold $50K, gold/silver ratio 1:10

Wed, 10/17/2012 - 16:47 | 2899223 strannick
strannick's picture

Gold sale on, while COMEX, unallocated LMBA, gold certificate, GLD supplies are thought to last.

Wed, 10/17/2012 - 21:34 | 2899780 philipat
philipat's picture

in the present state of central planning and manipulated markets, historical averages don't really count for much, especially with a desperate Fed. So the one weakness with this analysis is, what is there to prevent the cover ratio falling even further below the historical average?

Wed, 10/17/2012 - 22:45 | 2899965 European American
European American's picture

Damn it. All i have is a few pounds of gold.

Wed, 10/17/2012 - 14:43 | 2898631 BaBaBouy
BaBaBouy's picture

Option Bernanke... GOLD $50K ...

Wed, 10/17/2012 - 14:52 | 2898645 nope-1004
nope-1004's picture

I could never imagine a more perfect scenario:  Currency devaluation and debauchery world wide, gold rehypothecated, physical holding "held" in London and NY by bankers, ETF's totally faking physical in their possession to control price, banks at record short interest levels, and nations scrambling to unload debt.

You couldn't make up a better scenario for the metals.  I truly consider myself lucky to be living during this time, because when the manipulation hits the end of the line and everyone comes calling for their "stored" gold, it's going to get very interesting.

It's hard to see outside the forest when the forest is full of bankster thugs trying to sway opinion..... but PM's will absolutely skyrocket at some point.  At that point, I will go and piss in JPM's foyer, for the hell of it.


Wed, 10/17/2012 - 17:02 | 2899287 ParkAveFlasher
ParkAveFlasher's picture

I see your "piss in the foyer" and raise you a "shit in Jamie's hat".

Wed, 10/17/2012 - 17:53 | 2899420 Janice
Janice's picture

I call. Read 'em and weep....golden showers and do-do rain.

Wed, 10/17/2012 - 17:53 | 2899421 Janice
Janice's picture

I call. Read 'em and weep....golden showers and do-do rain.

Wed, 10/17/2012 - 17:54 | 2899424 Janice
Janice's picture

And a pair!

Wed, 10/17/2012 - 20:34 | 2899681 Supernova Born
Supernova Born's picture

"Very interesting" is about 100% likely to equal a "threat to national security" in progress. It won't be good a good time for anybody except tyrants, warlords and sadists.

Wed, 10/17/2012 - 14:48 | 2898658 killallthefiat
killallthefiat's picture

All of this presupposes the actual presence of gold in the vault.  Talk of gold at $12,000 implies that the Fed can keep this shit together infinitely.  But, to quote a Tyler:

On a long enough timeline the survival rate for everyone drops to zero.

Wed, 10/17/2012 - 14:05 | 2898539 Bay of Pigs
Bay of Pigs's picture

Indeed. $1800 is a launching point for the next leg up, not a blow off top.

Sadly, most get it totally wrong on gold listening to the deflation crowd and USD bulls.

Wed, 10/17/2012 - 14:40 | 2898630 Levadiakos
Levadiakos's picture

You'll need it to bail out your $50 silver.

Wed, 10/17/2012 - 14:59 | 2898688 oddjob
oddjob's picture

Bailouts are for sorry ass paperbugz. Just shut up and print cuz that's all you got.

Wed, 10/17/2012 - 15:54 | 2898947 Bay of Pigs
Bay of Pigs's picture

Great, another top caller on the silver market. 

Wed, 10/17/2012 - 18:30 | 2899494 Pubcoceo
Pubcoceo's picture

i totally agree with you, but even in deflation, as a store of value gold would even be more important. Gold at $100 in that scenario will still buy you a good used car. Gold isnt an investment its a fire insurance policy, and the constagflagration is here.

Wed, 10/17/2012 - 19:49 | 2899620 This just in
This just in's picture

constagflagration bitchez!

Wed, 10/17/2012 - 14:09 | 2898556 DoChenRollingBearing
DoChenRollingBearing's picture

@ redpill

Yes, great comments.  They will fight it and fight it, but in the end they will lose (keeping the price of gold down).  And when the price of gold starts its truly majestic rise, you are correct, "hold on to your butts".  Be prepared.  Silver will be nice for spending, hold your gold to carry your wealth through the hard times.

I believe the author of this article is using the Fed's gold holding figures incorrectly, as most the gold at the Fed belongs to foreigners...  Only a little of that gold is US gold.  Most of America's gold is at Ft. Knox.  Those +/- 7000 tonnes at the Fed may be there, but it is not ours...  Unless we confiscate it.  There is some fear in Germany (maybe among others as well) that the USA may do just that: CONFISCATE their gold, you know possession being 90% of the matter...  Still, I believe that the author is WRONG by using the Fed's gold holdings as a proxy for "our gold".

Please correct me anyone if I have the facts wrong.

Wed, 10/17/2012 - 14:30 | 2898596 Sophist Economicus
Sophist Economicus's picture

Bearing, you are right that the NY Fed only "stores" the gold in NYC:


The Federal Reserve Bank of New York maintains a vault that lies 80 feet (24 m) below street level and 50 feet (15 m) below sea level,[7] resting on Manhattan bedrock. By 1927, the vault contained 10% of the world's official gold reserves.[6] Currently, it is reputedly the largest gold repository in the world (though this cannot be confirmed as Swiss banks do not report their gold stocks) and holds approximately 7,000 tonnes (7,700 short tons) of gold bullion ($415 billion as of October 2011), more than Fort Knox. Nearly 98% of the gold at the Federal Reserve Bank of New York is owned by the central banks of foreign nations.[8] The rest is owned by the United States and international organizations such as the IMF. The Federal Reserve Bank does not own the gold but serves as guardian of the precious metal, which it stores at no charge to the owners, but charging a $1.75 fee (in 2008) per bar to move the gold. Moving the bars requires special footwear for the staff, to protect their feet in the case that they drop a 28 pound bar on their feet. The vault is open to tourists.[9]



Also, the FED has Treasury IOUs for the gold that was confiscated from them in 1934.     Treasury holds the gold in Fort Knox (if it is there).   Fed will never see it again....

Wed, 10/17/2012 - 14:44 | 2898644 Vooter
Vooter's picture

Thank god the staff's feet are protected....

Wed, 10/17/2012 - 14:35 | 2898614 Antifaschistische
Antifaschistische's picture

In my opinion gold is hated for one is hated because it is a method for HIDING wealth, not because it's a method of STORING wealth.   Wealth "stored" that can be confiscated is highly preferable.  A house is taxed, your car is taxed, your capital gains are taxed, your sales are taxed, etc.    But gold, sitting in your undisclosed location can't be tapped even if it is made a crime to posess.   If they don't know you have it...they can't tax it, or come get it.   THIS is the problem TPTB have with all you gold/silver/platinum/rhodium etc. fans.

And as Redpill is pointing out...$12k gold may sound great to all the hoarders of yellow, but we will not like the world that accompanies such a mess...and a mess it will definitely be.

Wed, 10/17/2012 - 14:42 | 2898635 Vooter
Vooter's picture

"$12k gold may sound great to all the hoarders of yellow, but we will not like the world that accompanies such a mess"

We'll like it more than the non-hoarders will...

Wed, 10/17/2012 - 23:18 | 2900028 Antifaschistische
Antifaschistische's picture

lol...yes, excellent point Vooter, and I too love hoarding.   I'm just not a doomsday prepper that just can't wait for doomsday.   I'm a reluctant prepper that is not looking forward to the certain demise of my beloved country.

Thu, 10/18/2012 - 09:28 | 2900773 fockewulf190
fockewulf190's picture

Reminds me of this scene from Gone With the Wind:

If Pa had one of those unfortunate boating accidents with his Phyzz over at his favorite fishing hole just a wee bit before the Yankees came and pillaged his poor Tara, he would have been drinking his whiskey in celebration that he and his family were going to pull through their Great Reset and not have to worry about having something to eat.

Paper isn't worth shit when your faced with a Great Reset.

Wed, 10/17/2012 - 15:03 | 2898700 Midas
Midas's picture

I am not so sure about apocalypse setting in because gold goes up by a factor of 7 in the next decade.  It has done that in the last decade without too much bother.

Wed, 10/17/2012 - 15:41 | 2898874 LongBalls
LongBalls's picture

Now you know, if you did not already, why the banksters hate to even print fiat anymore. The new push, and they will succeed, is for a digital currency. Even if gold is worth 12k or even 100K an oz. they will know when you go to cash in on your savings (gold) for use. Unless you barter........None-the-less, it's still better to have gold than not.

Wed, 10/17/2012 - 19:52 | 2899626 This just in
This just in's picture

Damn boating accidents!  I would have gladly reported all those ounces. 

Wed, 10/17/2012 - 21:10 | 2899722 Supernova Born
Supernova Born's picture

Gold is hated for the same reason the Evil Queen hated and wanted to kill Snow White.

Gold is the "fairest of them all".

Wed, 10/17/2012 - 23:13 | 2900019 GoinFawr
GoinFawr's picture

"And as Redpill is pointing out...$12k gold may sound great to all the hoarders of yellow, but we will not like the world that accompanies such a mess...and a mess it will definitely be"

Didn't Paul Van Eeeeeden and every other gold bear predict the same thing would happen when ('if' for him still?) gold passed 1200 US bitz and bytes?... and here's me years later still not having to line up for toilet paper.

As for your first observation: STFU 'loose lips...' !

Wed, 10/17/2012 - 14:05 | 2898543 Stoploss
Stoploss's picture

I am using one thousand an ounce per 1 trillion, for my conversions.


Gold today: =  16,100

Wed, 10/17/2012 - 14:31 | 2898602 giggler123
giggler123's picture

Don't be greedy now, 16,099

Fag's to U yellow bugs, I'm hoarding earth, can't eat gold?  Can only buy food when someone else wants to sell, but you can grow food and for that you need brown ;)

Wed, 10/17/2012 - 14:56 | 2898674 ciscokid
ciscokid's picture

With gold in your pockets you could buy anything you want.

Wed, 10/17/2012 - 15:12 | 2898726 Long-John-Silver
Long-John-Silver's picture

The government will come in and take your "Brown". You can't hide property. People lost their farms in the great depression because they could not pay the taxes on it. FDR also made it near impossible for a non-NRA farmer to sell his products to pay his taxes so he could keep his farm.

Wed, 10/17/2012 - 18:48 | 2899523 Overfed
Overfed's picture

Silver too, bitchez!


I've always wanted to say "bitchez" on ZH.

Wed, 10/17/2012 - 13:53 | 2898491 Jam Akin
Jam Akin's picture

To infinity and beyond.

Wed, 10/17/2012 - 13:53 | 2898492 Dr. Engali
Dr. Engali's picture

Gold bitchez!

Wed, 10/17/2012 - 14:02 | 2898531 A Lunatic
A Lunatic's picture

An excellent prescription, good Doctor........

Wed, 10/17/2012 - 14:11 | 2898560 DoChenRollingBearing
DoChenRollingBearing's picture

LOL, and the more the better re this prescription!

Wed, 10/17/2012 - 19:55 | 2899630 This just in
This just in's picture

Can you OD on gold?

Wed, 10/17/2012 - 21:06 | 2899715 TexasTrader
TexasTrader's picture

Sure can ... I believe King Midas died of starvation right?  Of course I will keep hoarding until I get to the point that everything I touch turns to gold, then I might cut back a little.   ;-)

Wed, 10/17/2012 - 21:16 | 2899740 Harbanger
Harbanger's picture

You can't OD on it but you will need some Castor oil.

Wed, 10/17/2012 - 13:54 | 2898493 Bazinga
Bazinga's picture

The relic, Munger? Oh, you mean that shiny stuff Bernanke hates in public but collects in private...

Wed, 10/17/2012 - 13:56 | 2898508 Bay of Pigs
Bay of Pigs's picture

Hey Chaaaaaarlie, lets go up to Candy Mountain!

Just die already you useless fucker...

Wed, 10/17/2012 - 13:54 | 2898494 Confundido
Confundido's picture

But, but you can't eat gold!

Wed, 10/17/2012 - 14:08 | 2898554 Doubleguns
Doubleguns's picture

And pray tell how do you prepare your fiat for consumption. As a salad?!!

Wed, 10/17/2012 - 14:12 | 2898565 rfaze
rfaze's picture

At least you can use fiat to burn.....or wipe your ass.

Wed, 10/17/2012 - 15:15 | 2898738 Whalley World
Whalley World's picture

yeah, the cocaine lodged in the fibre would give you happy ass after a good wipe.

Wed, 10/17/2012 - 21:28 | 2899768 Harbanger
Harbanger's picture

An ass freeze.. That's just wrong bro.

Wed, 10/17/2012 - 13:54 | 2898495 cat2
cat2's picture

This is solidly true, but I think you have to understand that the Fed will actively fight gold discovering it's true value.  Buying gold is fighting the Fed.

Wed, 10/17/2012 - 18:25 | 2899487 DosZap
DosZap's picture

This is solidly true, but I think you have to understand that the Fed will actively fight gold discovering it's true value. Buying gold is fighting the Fed.

Yes,so true.

BUT, right now, there is a Major leauge shortage at LBMA in Silver, and Gold is not far behind.

This shorting/paper game shit is fixing to end, and when it does, Silv, and Au, will be VERY difficult to purchase, if you can get it.

Anyone wanting any substantial quanities from LBMA is screwed NOW.

Major Ben E Bux dumping is taking place already.

Wed, 10/17/2012 - 13:54 | 2898498 fonzannoon
fonzannoon's picture

This article totally misses the mark. Did Minerd see the housing farts number this morning? Or the retail sales number? How about the NFP? I am getting real concerned that the fed will not be able to step in in time to slam the brakes on growth. He is not going to have the benefit of .25% raises to control this overheating ferrari of an economy. As far as QE is concerned it is game over. Now that the banks have shored up their balance sheets and are beasts again they can shut that spicket off pronto. I can't see how any of this is good for gold.

 - Bob Pissonme.

Wed, 10/17/2012 - 14:05 | 2898542 Dr. Engali
Dr. Engali's picture

For a minute there I thought you were MDB.

Wed, 10/17/2012 - 14:06 | 2898548 fonzannoon
fonzannoon's picture

Ha, I am practicing for my re entry into the matrix when I finally lose it.

Wed, 10/17/2012 - 14:10 | 2898558 Dr. Engali
Dr. Engali's picture

I'm right there with you brother....I could go for a good juicy filet right now.

Wed, 10/17/2012 - 14:10 | 2898559 Pladizow
Wed, 10/17/2012 - 14:16 | 2898579 fonzannoon
Wed, 10/17/2012 - 13:54 | 2898499 katchum
katchum's picture

The Gold Coverage Ratio only depends on Federal Reserve, what about other central banks?

Wed, 10/17/2012 - 14:00 | 2898522 cat2
cat2's picture

This is true.  And this price also assumes that US still has it's gold, if some of that is missing, the denominator decreases and the $/gold ratio increases.

Wed, 10/17/2012 - 15:35 | 2898538 Jam Akin
Jam Akin's picture

At this time official gold spot value as a % of Sept M1 = 19.2%  (8133.5 tons @$1750/oz - vs Sept M1 @ $2379.1 Billion) Could be calculated same way for the other banks.

Wed, 10/17/2012 - 13:55 | 2898501 azzhatter
azzhatter's picture

The econmy is squeezing me pretty bad. I now can only afford silver for my weekly stockpiling.

Wed, 10/17/2012 - 13:58 | 2898512 Cognitive Dissonance
Cognitive Dissonance's picture

Don't forget to stockpile Lead and Larder.

Wed, 10/17/2012 - 13:58 | 2898515 Dr. Richard Head
Dr. Richard Head's picture

Pissing my fiat away for a few weeks in Oahu.  Not the smartest thing to do right now, but I feels goodz about me pile of metal that I lost in the ocean.

Wed, 10/17/2012 - 14:12 | 2898562 Pladizow
Pladizow's picture

Had a friend named: Richard D. Kaye.

Wed, 10/17/2012 - 13:56 | 2898509 Hedgetard55
Hedgetard55's picture

Wow, when this happens copper jacketed lead will be the most precious metal.

Wed, 10/17/2012 - 14:00 | 2898521 Dealer
Dealer's picture

But, but there isn't enough gold in existance..

Wed, 10/17/2012 - 16:13 | 2899067 pufferfish
pufferfish's picture

Make it in nuclear fusion reactors. It may even outweigh the cost if it's $22,000 an oz.

Gold is created from the decay of fusion.

Gold is created in a supernova.

Wed, 10/17/2012 - 14:05 | 2898536 centerline
centerline's picture

This article assumes the pricing mechanism remains intact.

Wed, 10/17/2012 - 14:06 | 2898546 Mr. Hudson
Mr. Hudson's picture

: "At that point whether one bought gold at $1000, $1500 or even $2200 will be absolutely irrelevant."

It will be irrelevent because our federal government will make owning gold a crime, just like FDR did in 1934.

Wed, 10/17/2012 - 14:08 | 2898555 Bay of Pigs
Bay of Pigs's picture

That argument assumes the whole world will outlaw gold.

Epic Fail

Wed, 10/17/2012 - 14:17 | 2898578 Mr. Hudson
Mr. Hudson's picture

How so? The whole world didn't outlaw gold in 1934. Besides, I am only repeating what investor Marc Faber said. He's a billioniare and owns a lot of gold.

Wed, 10/17/2012 - 14:27 | 2898597 Bay of Pigs
Bay of Pigs's picture

Exactly my point. This isnt the 1930's. Please get your facts straight. 


Wed, 10/17/2012 - 15:29 | 2898786 Mr. Hudson
Mr. Hudson's picture

China, Russia, India, South Africa and Brazil are currently trying to undermine the U.S. dollar as the world's reserve currency with either a basket of currencies, or new currencies which could be backed by gold and silver. Those countries are stockpiling gold while the American people have no clue how much gold sits in Fort Knox. The reason that FDR made it illegal to hoard gold is because all of America's gold reserves went overseas to Europe's Central Banks in the 1920's when the Fed lowered interest rates. So, if America loses OPEC, which may happen, and our Treasury has no gold reserves (as many on this forum assume), our government will be caught with its pants down and have to take drastic measures. When we have hyper-inflation people will not hold onto U.S. dollars, but gold. So to keep money circulating and maintain some type of economy, the government will impose wage and price controls and confiscate gold. Faber's prediction sounds reasonable. He has encouraged Americans not to hold onto their physical gold inside America because the government will take it.

Wed, 10/17/2012 - 15:45 | 2898898 Bay of Pigs
Bay of Pigs's picture

That is a bunch of crap. Americas gold reserves went overseas? LOL...where did you ever hear that?

My Dad is 91, and lived through the Great Depression. I can assure most Americans didnt turn their gold in, and wont do it now.

And who the fuck is junking me for stating the obvious? The rest of the world isnt going to outlaw gold. Comprehension issues?

Wed, 10/17/2012 - 16:01 | 2899010 Mr. Hudson
Mr. Hudson's picture

Chill, dude; nobody is junking you. Read "The Great Depression" by Murry Rothbard; "Secrets of the Federal Reserve" by Eustace Mullins and "Creature From Jekyll Island" by Griffin. Those books will explain what collusion Ben Strong and Montagu Norman engaged in that caused the Great Depression; and yes, all of our gold reserves in the New York Fed's vaults went to England in the mid 1920's. And as far as "comprehension issues", as I mentioned, I was taking Faber's position. Look him up also while your at it.

Wed, 10/17/2012 - 19:27 | 2899484 Bay of Pigs
Bay of Pigs's picture

Yes, some gold was loaned to European CB's. It was England leaving the Gold Standard in 1931 that set off the chain reaction and Great Depression. 

I'm not sure what youre driving at. The US govt will not be able to confiscate gold this time around. Impossible to implement in a global economy. That didnt exist in the 1920's and 1930's.

Wed, 10/17/2012 - 17:10 | 2899311 Panafrican Funk...
Panafrican Funktron Robot's picture

Yeah, it's not terribly challenging to travel to Canada.  They're pretty gold-friendly up there.  

Wed, 10/17/2012 - 14:38 | 2898625 Vooter
Vooter's picture

So break the law.

Wed, 10/17/2012 - 15:35 | 2898832 Dr. Gonzo
Dr. Gonzo's picture

and yet I still managed to legaly buy a whole bunch of St. Guadens and double eagles...after the government made it legal to own again. Funny how shit like works. Gold confiscation is completely uninforcable unless your stupid enough to have your gold stored with the Jon Corzines of the world.

Wed, 10/17/2012 - 21:36 | 2899785 BooMushroom
BooMushroom's picture

And then, like marijuana and cocaine, it will be impossible to buy or sell.

Wed, 10/17/2012 - 14:06 | 2898549 ItchyBeard
ItchyBeard's picture

Here you go fellows, tips to avoid boating incidents and losing your PMs

Wed, 10/17/2012 - 14:32 | 2898605 crusty curmudgeon
crusty curmudgeon's picture

I have no idea what I was supposed to learn from that, but I enjoyed it immensely.

Wed, 10/17/2012 - 16:26 | 2899130 RockyRacoon
RockyRacoon's picture

Best shot at 2:10.

Wed, 10/17/2012 - 17:13 | 2899320 Panafrican Funk...
Panafrican Funktron Robot's picture

*mumbles something about "mast circumference"*

Wed, 10/17/2012 - 14:09 | 2898551 DavidPierre
DavidPierre's picture

The extreme Gold price breakout will be fast powered by the realization of the QE3 arrival, its unsterilized nature, and its much greater volume than previewed. The keys are both lack of sterilization and outsized volume. The USFed is fast running out of dry powder in USTBills, which means the bond monetization will be done with fresh money and not proceeds from sale. This is hyper monetary inflation of the worst order, akin to Weimar times. The volume of bond purchases within the QE3 framework will be between three and five times larger than announced. 


No rational bond buyers remain. Even the official bond dealers are facing extinction.


See Cantor Fitzgerald, one of the biggest bond scum peddlers on the planet, a key accomplice for JPMorgan in the removal of both Enron fraud and USTreasury Bond fraud back in the dark days of autumn 2001.

Their repository building fell in structural sympathy.


Wed, 10/17/2012 - 14:12 | 2898561 fonzannoon
fonzannoon's picture

@DavidPierre is that why they are at a high fever pitch with how great the data is lately? Therefore soon no need for more QE? That would be great if they could pull it off. But you stop the QE and it's game over. I am stuck on this.

Wed, 10/17/2012 - 14:48 | 2898657 nofluer
nofluer's picture

What can we do to prepare for this?

Learn how to spell "Weimar" as you'll be using it a lot.


How long will the crash last?

Depends on how fast the idiots at the FED and Treasury learn how to spell "Rentenmark".

Wed, 10/17/2012 - 14:14 | 2898569 BanjoDoug
BanjoDoug's picture

The last paragraph here is of paramount importance.   Too many articles spend excessive verbiage comparing gold to dollar equivalents (i.e. what is the price of gold today, where will it be tomorrow?).  The banksters are destroying the currency (deliberately), and since all currencies are linked to the reserve currency all of them are in serious trouble.   You should invest in physical gold (& silver) as a non-destroyable source of wealth, and don’t compare it to the dollar equivalents from day to day.  When the wise men brought gold to Joseph & Mary there was a reason……..  You, your children, or grandchildren may have  similar needs during some (very possible near) “future” crisis.  Don’t let the banksters rob your assets by turning your dollars into toilet paper…..

Wed, 10/17/2012 - 14:19 | 2898582 Tinky
Tinky's picture

Three Scenarios For Gold?


1. Up

2. Up

3. Away

Wed, 10/17/2012 - 16:01 | 2899002 imbrbing
imbrbing's picture

adorned with a silver cape

Wed, 10/17/2012 - 14:19 | 2898583 Ham-bone
Ham-bone's picture

The Fed has won the reflationary battle...this means Gold/silver will win the war.


Wed, 10/17/2012 - 14:20 | 2898587 gmak
gmak's picture



Fiat bills are a claim against ALL assets, including productive ones (industry) of which gold is simply one of.... (today).  One could just as easily take any asset class and do the same thing. To exlude all asset classes from the denominator leaving only gold makes no sense.  Otherwise, China et al would be buying only gold, not gold along with every productive and extracting asset they can get their hands on.

Wed, 10/17/2012 - 15:49 | 2898912 AMack
AMack's picture

You're forgetting the monetary function of gold as a substitute for fiat. In a world where gold is rapidly emerging as a substitute for fiat, both of which can be used as a claim against all other assets (as you said), when the marginal utility of one unit of fiat falls (via money printing) the marginal utility of gold rises. It is a question of marginal rates of substitution, not what assets each is a claim against.

Wed, 10/17/2012 - 14:21 | 2898588 dick cheneys ghost
dick cheneys ghost's picture

From Gold Switzerland.........

The Ultimate Bubble is Paper Money


''As those that own the gold become reluctant to buy the paper with it, those that own the gold will hold the gold close to their chest and say, ‘I am comfortable standing where I am, I have no need for that paper’. The problem comes from the fact that those who have paper are still very eager, ‘Please would you give me a little bit of gold? Here’s more paper, how much do you need?’ and they will open their wallets for more gold. This is obviously a process of rising price but in the new Austrian School we’re more interested in spread; what’s happening here. Well, many people in the gold world realise gold is the only commodity where rising prices can lead to reluctance to sell. If this happened in crude oil, if this happened in copper, commodities would come out of the woodwork and the price would correct. But in the case of gold, not so.''



Wed, 10/17/2012 - 14:23 | 2898589 Peter Pan
Peter Pan's picture

Let's not get over excited at the prospect of $12000 gold because if it happens any time soon our lives will be in serious danger even if they suspect that we have a single oz in our possession.

Just be happy to own something that will still be standing when everything else collapses.

Wed, 10/17/2012 - 14:43 | 2898640 ParkAveFlasher
ParkAveFlasher's picture

You mean a move like in '80 - '81?

I feel just the right amount of excitement at the prospect of that kind of multiplied gold price.  They won't come get it from me.  They will let it happen.  In fact, they will make it happen.  It will help them, too, by that point.

Wed, 10/17/2012 - 14:28 | 2898598 walküre
walküre's picture

Obama gold $17,516

Romney gold $516

Wed, 10/17/2012 - 14:34 | 2898611 fonzannoon
fonzannoon's picture

Go on....please expand on those forecasts (don't bother with Obama, agreed).

Wed, 10/17/2012 - 14:52 | 2898668 walküre
walküre's picture

The Romney camp prays to King Dollar. The dilution is complete. Now they need to ride the opposite way to get their money's worth. They will possibly reduce the debt when they ask everyone to take a haircut and offer higher interest rates on the remainder. Every other option is inflationary. Romney is a deflationist. Only cash holdings will benefit from deflation.

That is "the plan" imo.

Wed, 10/17/2012 - 15:04 | 2898696 Ham-bone
Ham-bone's picture

Don't know who Romney preys to but I know congress is in charge of spending regardless who is president...and congress likes to spend, bring home the pork, and get re-elected.  Not spending is no way to get re-elected.

There will be be deficits regardless who is in white house and regardless if Repubs take over both house and senate.  Particularly because Fed ensures all those interest free loans on that spending w/ QEternity.

PM's will not be bothered by who is domiciled in the white house.

Wed, 10/17/2012 - 15:08 | 2898713 walküre
walküre's picture

Romney's fortune wasn't built on a track record of spending his way to the top. There is alot at stake. Fiscal cliff, rumors of war, Euro collapse, USD hegemony threatened by China/Russia and so on. If your sitting on piles of USD denominated cash, you will want to preserve whatever value it has. You will also want to get the biggest bang for your buck.

Forget Congress. They're paid banking shills. The banks are in reasonably good shape. They can weather the storm and come out even better on the other side. The average American will go in the crapper, lose more freedoms and see their networth disappear.

Welcome to the next chapter in the feudal society.

Wed, 10/17/2012 - 15:03 | 2898699 fonzannoon
fonzannoon's picture

there is a very small part of me that thinks Romney is just the type of hedge fund guy to actually attempt to do this. if he does we will look like greece right quick.

Wed, 10/17/2012 - 15:12 | 2898728 walküre
walküre's picture

Yes, my thoughts exactly. What is odd is how the banks (GS) are supporting Romney vs. Obama. They benefited from Obama/Bernanke but I guess we all see that Bernanke is at the end of his wisdom (QE3 is a fail) or he is supposed to set the stage for the end. The cheap money policy has helped the banks and nobody else. That was Obama/Bernanke accomplishment. Now the banks are seemingly biting the hand that fed them for so long? Makes no sense unless they have the inside track and understand what Ben meant when he said "banks want more for their deposits". Ben can't deliver that and he knows it. He will be retired with a "job well done" for the banks. The next guy can raise rates and the banks will "get more on their deposits".

Wed, 10/17/2012 - 15:21 | 2898750 fonzannoon
fonzannoon's picture

i hope they raise rates. the banks will choke on those treasuries overnight. It will be an avalanche.

Wed, 10/17/2012 - 15:57 | 2898974 walküre
walküre's picture

Not with the Fed at the door waiting to buy off the paper in a new twist.

Wed, 10/17/2012 - 14:37 | 2898618 Ham-bone
Ham-bone's picture

Serious?  No "sarc" tags?

Wed, 10/17/2012 - 14:42 | 2898636 fuu
fuu's picture

"Romney gold $516"

Pass the dutchie to the left hand side.

Wed, 10/17/2012 - 14:56 | 2898678 walküre
walküre's picture

WTI $50 ish

Wed, 10/17/2012 - 15:06 | 2898711 fuu
fuu's picture

So gold is dropping 71% and WTI 46% in January if Mittens gets the nod?

Only in his fever dreams.

Wed, 10/17/2012 - 15:13 | 2898734 walküre
walküre's picture

if he wants to reduce the federal debt by several trillions - yes

but it won't happen by January 2013

Wed, 10/17/2012 - 15:17 | 2898743 fuu
fuu's picture

He wants to increase spending and reduce tax receipts. How is that debt reduction?

Wed, 10/17/2012 - 16:03 | 2899020 walküre
walküre's picture

It's his plan, not mine!



Wed, 10/17/2012 - 16:19 | 2899097 fuu
fuu's picture

I'm just askin'!

Wed, 10/17/2012 - 15:22 | 2898754 fonzannoon
fonzannoon's picture

i think there won't be enough bullet proof vests around if he cuts a few trillion

Wed, 10/17/2012 - 14:31 | 2898600 Sixdeuce062
Sixdeuce062's picture

I prefer to in vest in lead and carbon steel food land i cant eat gold but i can pick it up off the dead who thought all he needed was gold after i deal with the mob  trying to get it

Wed, 10/17/2012 - 14:34 | 2898612 americanspirit
americanspirit's picture

Does anyone here seriously think that the Feds are NOT mining every blog on the internet to identify who owns gold?

Wed, 10/17/2012 - 14:40 | 2898628 fonzannoon
fonzannoon's picture

I honestly don't. Maybe I am naive. I think it wil be a hell of a lot easier taking over the GLD vaults etc first and hedge funds second. By the time they get to most of us and our boating accidents it won't be worth their energy.

Wed, 10/17/2012 - 15:05 | 2898687 crusty curmudgeon
crusty curmudgeon's picture

"Does anyone here seriously think that the Feds are NOT mining every blog on the internet to identify who owns gold?"

LMAO.  I'll either have kicked the bucket or escaped from 7 FEMA camps before they worry about who owns gold.

But seriously, I like your spirit.  The fact that you know this and still post here means you have that "f-them" attitude.

Wed, 10/17/2012 - 14:53 | 2898620 “Rebellion to t...
“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

Words to the wise:  If you live in this country and you own physical gold, whether it be coins or bars, jewelry, and perhaps even dental fillings, the US government will eventually requisition your holdings as a matter of national security.

When the fiat currencies of the world fail miserably, those in charge will do what they must to acquire legitimate wealth.

Holders of physical gold have 3 options:  1)Outlive the government. 2) Eat the precious metal, because when you're hungry, that will be all you can do with it. 3) Say fuck it and hide it in a deep enough remote location that only a person far into the future will ever find it.

Look at it like this:  People who have a mortgage on their home are merely good caretakers for said property for the US government(Fannie/Freddie). Just as those who prefer to hoard the precious metals are merely custodians for those same powers.  The gub'mint eventually will either take anything of value outright, or tax you into submission.

Wed, 10/17/2012 - 15:01 | 2898694 nofluer
nofluer's picture

"They will either take it outright or tax you into submission."

As an upper-lower class person, I've never had enough $$$ to buy gold with. Food and fuel took most of what I made. But I could make payments on a bit of ground to put a garden on.

So will I survive the crash and the Weimar times? Don't know because even if I can get the ground paid off (bank loan) before  the SHTF, we have property taxes here, so I can never really own the ground. I have to pay the government rent (taxes). Don't pay the rent - they confiscate the ground just as they would gold. So I'm hoping that I can maybe keep working or earning enough current income to pay the rent. Do you think a government tax collector will take a basket of green beans as a tax payment in lieu of cash?

Wed, 10/17/2012 - 15:05 | 2898705 “Rebellion to t...
“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

Nice try with the green beans pal.  Heck no!

They will merely enslave your progeny, dumb ass!

Wed, 10/17/2012 - 15:10 | 2898721 nofluer
nofluer's picture

Ha. Then THEY'D have to feed them!

Wed, 10/17/2012 - 15:15 | 2898737 “Rebellion to t...
“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

Debt slave, you silly bitch.  Our esteemed future gub'mint would never be so crass to keep actual slaves.

Wed, 10/17/2012 - 15:53 | 2898948 walküre
walküre's picture

You got it. SNAP feed 'em.

Seriously though. I like your angle. Just make sure that you remember where you hypothetically speaking stored the gold that you don't have when you can no longer afford to pay the rent on the ground. Also, make sure your passport is always up to date.Not for a legal crossing but to identify to the foreign authorities who you are. Cross by land into either Mexico or Canada only illegally. Pay your helpers in small bills. Know a good seamstress who can sow the gold you don't have into any pair of washed and ripped jeans and nobody will suspect you have anything.

Wed, 10/17/2012 - 16:05 | 2899024 SilverRhino
SilverRhino's picture

Silver, bulkier but has never been nationalized.   And much easier to hide via metal working.   

Wed, 10/17/2012 - 14:39 | 2898626 Backdraft
Backdraft's picture

"The U.S. gold coverage ratio, which measures the amount of gold on deposit at the Federal Reserve"

correction... "alledgely on deposit"

Wed, 10/17/2012 - 14:47 | 2898656 lasvegaspersona
lasvegaspersona's picture

a trip to fofoa's blog is worth the effort: is $44.22/OZ officially in the USA, silly I know but the 'coverage' ratio above clearly did not use the official numbers.

2...several article about the low probability of confiscation.

3...future gold value may not be determined by coverage ratios at all, fofoa has an entirely different view on this future value, it is different than what Faber, these guys or Rickards see. While no one can be certain I believe that fofoa's perspective is worth at least knowing. He sees, not a bull market but a reset to a higher price. Those with this view will not be trying to time the sale of gold they will be buy-n-hold stackers. This insight alone is worth the trip to his blog.

Wed, 10/17/2012 - 17:15 | 2899325 DowTheorist
DowTheorist's picture

I agree with you. Any individual really serious about gold should read FOFOA. It is a steep learning curve, but the reward is worth the effort.

Wed, 10/17/2012 - 15:02 | 2898691 edifice
edifice's picture

Whoever produced the graph is plotting a trendline from the tops of the last two bull markets. However, if you plot a trendline from the bottoms of the 3 troughs,prior to the last legs up, you get a pretty steep downtrend in the amount of currency that gold should cover, this time around.

I'm guessing maybe 90% coverage at the top of this bull market. This puts the price at the top around $11,500/oz., in 2012 dollars.I know, silly to try and predict these things, but it's worth noting. I have produced a modified version of this chart, showing what I mean, if interested.

Wed, 10/17/2012 - 15:04 | 2898703 SILVERGEDDON

Water, food, lead, copper, land, firewood, community. It's what's for investing in. Way tougher to confiscate, more up side to survival.

Sheep will still be wondering what happened to Snooki and their I-Crack phone feed.

Wed, 10/17/2012 - 15:08 | 2898706 earleflorida
earleflorida's picture

Let us not forget that the world's jewelry cartels are quite fond of gold priced at where [*stability] it is {[perhaps a lot lower to satisfy it's insatiable clientele from being frozen out of a highly lucrative market?[[think of DeBeers et.el.,]} as a means to keep the dirt farmers digging?

Ps. when the gov't. pulls another Executive Order #6102 [ie. an inverse Qe-Redux on the tangible axis of being 'ass raped of all physical dignity', whilst will dig our own graves making our dispos[it]al all the more appro-avante`garde...

**Four[4] Scores to date was Lincoln's !st rape of "Necessity" 


Wed, 10/17/2012 - 15:09 | 2898720 Bastiat009
Bastiat009's picture

"And whether or not the New York Fed, or some gold cartel, are actively pushing the price of gold lower, this is very much irrelevant ..."

"On a long enough timeline ..."

Since my life expectancy is limited, if the cartels, martians, the Fed or whoever pushes the price of gold lower for the next 50 years is very much relevant.

I want to live before I die.

Wed, 10/17/2012 - 15:16 | 2898739 debtor of last ...
debtor of last resort's picture

London Trader 3 posts on KWN about gold and silver

Wed, 10/17/2012 - 15:23 | 2898756 Bam_Man
Bam_Man's picture

Jesse has done an excellent job tracking the "cup and handle" that is nearing completion on the Gold chart. Once the "handle" (minor correction) is complete, the next leg up targets $2,200 to $2,400 - probably before the end of the year.

Wed, 10/17/2012 - 15:34 | 2898831 hawk nation
hawk nation's picture

I just discovered my kids were using my PM's coins in both gold and silver as regular face value currency when they were going to the local ice cream shop

I am now left with no PM's


After hearing about the boat tragedies on this blog has anyone else experienced their kids using the PM's coins as common face value currency? 

Wed, 10/17/2012 - 20:23 | 2899668 Supernova Born
Supernova Born's picture

"What's the matter, Mitch, don't you like water sports?"

Boat accidents, unlikely stories?


Thu, 10/18/2012 - 12:34 | 2901371 ManOfBliss
ManOfBliss's picture

I doubt the idiot teenagers at the register in the ice cream shop were accepting your funny looking coins as payment.

Wed, 10/17/2012 - 15:42 | 2898875 MrMorden
MrMorden's picture

Isn't the problem here that when gold = $12,000 that a loaf of bread = $1000?

Wed, 10/17/2012 - 16:08 | 2899040 imbrbing
imbrbing's picture

I agree, but thats 12 more loaves for the guy with an ounce than for the guy with nada. He might sell you his house though for a couple of those ounces so he can eat.

Wed, 10/17/2012 - 16:09 | 2899053 Mr. Hudson
Mr. Hudson's picture

There comes a point when a loaf of bread is worth more than gold. Remember in the movie "Schindler's List" where the Jewish man in the hot and dry cattle car was being deported to Aushwitz, and offered up a beautiful diamond and ruby necklace for a drink of water?

Wed, 10/17/2012 - 17:57 | 2899434 Panafrican Funk...
Panafrican Funktron Robot's picture

That is one more cup of water than the dude without the bling.

Wed, 10/17/2012 - 16:14 | 2899082 jimmyjames
jimmyjames's picture

Isn't the problem here that when gold = $12,000 that a loaf of bread = $1000?


Yes of course-i mean gold is $1700 today and a loaf of bread is $170 so it only makes sense-

Wed, 10/17/2012 - 16:36 | 2899190 RockyRacoon
RockyRacoon's picture

Isn't the problem here that when gold = $12,000 that a loaf of bread = $1000?

That's not a bug -- that's a feature.   "Store of Wealth" thus defined.

Wed, 10/17/2012 - 21:34 | 2899779 bardot63
bardot63's picture

You've stated the problem backward.  When bread is $1,000 as you say, you'd have the money to buy bread with gold at $12,000.  You seem to be saying, why bother owning metal if prices are just going up anyway.  It's because prices are going up anyway that you should own metal.

Wed, 10/17/2012 - 15:53 | 2898946 walcott
walcott's picture

17% there's the fractional reserve. They have it figured out completely.

Dimon and co. must have some good laughs over the douchebags on youtube

every friday at the lounge after hours. If they even waste their time.

Just like Iran and the entire middle east I. It's a bunch of

stone aged neanderthals that are most definitely in the way of 

oil pipe lines and any kind of progress in general.

Can't keep subsidizing that herd. Unimaginable its went on this long.


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