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Three Scenarios For Gold
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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I dont think Iran is living in the stone age, that IS the problem.
I'm impressed that the amount of gold on deposit at the Federal Reserve is anything close to 17% of total money supply.
I'm impressed that the amount of gold on deposit at the Federal Reserve is anything close to 17% of total money supply.
I do not believe that stat for ONE second.
If it is, it's because they are counting all other countries Au as their own.
All of this is true, but between here and there we will be suffering massive deflation as the amount of debt (debt=money) decreases in the shadow banking system (which is huge). All these QE's are nothing in comparison with the debts that will need to be paid down. The US dollar will rise dramatically because all these debts are in dollars. You will see.
FDR wanted to devalue the dollar which was tied to gold. That is why he wanted to confiscate gold. Now that the dollar is a fiat currency, there is no need for confiscation. They can devalue the dollar by printing a lot of dollars; as a matter of fact they are already doing it.
What happens in America if China, Russia, India, South America, and Brazil succeed in creating a reserve currency backed by gold? Does the Fed/Treasury have enough gold on hand to compete? When FDR took office he discovered that there were no gold reserves; it had all gone to England. He had to build back the Treasuries gold reserves, which had been”stolen” by the House of Rothschild; via The Bank of England. We had two currencies at that time; FRNs and Treasury Notes; the FRNs backed by debt, and the Treasury Notes were backed by gold. Americans could walk into a bank and exchange Treasury Notes for gold coins, so we were on a gold standard until FDR passed the Gold Act of 1934. FDR had Americans sell their gold for $20.00 an ounce to the Treasury, and then he set the value of gold at $35 an ounce; thus devaluing the dollar. England went off the gold standard and FDR bought back from the Bank of England and other Central Banks all the gold that had been in the New York Fed’s vaults in the 1920’s. We bought back our gold at a higher price from Rothschild (they stole it; we bought it back). FDR knew we were headed for WW2, and we could not give aid to Stalin and England with only worthless FRNs.
The technical makeup of the gold market provides tailwind for gold and the insights of the article.
Gold is in a primary bull market under the Dow Theory. A primary bull market is much more than just a tradable rally. We are talking of a powerful move that may last 1-2 years and witness price gains of ca. 40%. More on gold's primary bull market:
http://bit.ly/Ooer8T
If gold just experiences an "average" gain of 40%, we get a price target for this bull market leg of:
1750 x 1.4 = 2,450
Of course, nothing is carved in stone, but the odds favor such an outcome. So the lower estimate of the article doesn't look far-fetched.
Regards.
Boring decline ahead. Like aging. Nothing to fight. Nothing to excite.
By the time Gold reaches 12k per ounce, I will have already eaten all of mine (along with my 2 iPads)
There is not any gold "on deposit" with the FED. If there was, the owners of the gold would be getting 4% per annum. In reality, the gold IS STOLEN and the rest of the world is pissed and wants it back. The 100+ nation BRICs alliance has placed trillion dollar liens on the FED and BIS stolen gold, and the alliance is about to cease dollar-denominated trade forever!
http://sirratatap.com/?s=liens
Interesting website. Do know where on the net there is a video of Fulford interviewing Rockefeller?
youtube took it down.
this one? http://video.google.com/videoplay?docid=-3704527408635856046
Yes. Thank you.
Wish I could afford more, only have 10 grams.