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Where Should Gold Be Priced Relative to the Fed's Balance Sheet?
Since 2007, the world’s Central Banks have collectively put more than $10 trillion into the financial system since 2008. To put that number into perspective, it’s equal to roughly 15% of global GDP.
This kind of money printing is literally unheard of in modern history. And it has set the stage for a roaring wave of inflation to hit the financial system. Indeed, the first signs are already showing up... not in the “official” Government data (which is bogus) but in how those who run businesses around the globe are acting.
Most people believe that when inflation hits, prices have to go higher. This is true, but higher prices can be manifested in multiple ways. Firms usually do not simply raise prices in nominal terms because it would hurt sales.
Instead, companies resort to a number of strategies to maintain profit margins without hurting their sales. One of them is to simply leave part of a package EMPTY, thereby selling LESS product for the SAME price (a hidden price hike).
Food manufacturers, like the politicians currently debating health reform, may have a solution to the obesity crisis: Feed Americans a lot of hot air. But this heated air is not just a figure of speech for packaged goods companies including Ralcorp Holdings' (RAH) Post Foods and PepsiCo (PEP) subsidiaries Frito-Lay and Quaker.
In many packaged products, as much as 50% of the contents is just empty space, an investigation by Consumer Reports reveals. And we consumers are buying that nothingness every day.
Another tactic corporation use is to simply sell smaller packages for the SAME price (another means of selling less for MORE= a price hike).
U.S. Companies Shrink Packages as Food Prices Rise
Large food companies have recently announced that they will raise the prices they charge grocery retailers for commodities-based products. For example, a chocolate bar will cost more soon: Hershey last week announced a 10% increase for most of its confectionery goods.
Of course, straightforward price hikes could cause consumers to buy less of those products or to choose less costly store brands. So in many cases, food companies are trying a different tactic: Keeping the price of an item the same while decreasing the amount of food in the package. The company recoups the costs of the rise in commodities and hopes consumers don't notice that they're getting less of the product for the same price.
http://www.dailyfinance.com/2011/04/04/u-s-companies-shrink-packages-as-food-prices-rise/
However, perhaps the most scandalous policy employed by companies looking to engage in stealth price hikes is to swap out higher quality ingredients for lower quality/ lower cost alternatives. One bigname coffee maker was caught doing this just a few years ago.
Reuters is reporting that many of America's major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they're now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee…
At least one coffee roaster has admitted it. In November, Massimo Zanetti USA, which roasts for both Chock full o'Nuts and Hills Bros., publicly confirmed upping its Robusta usage by 25% this year.
Why the switcheroo? Prepare to not be shocked. The answer is: price.
Last year, a shortage of Arabica caused prices of the premium bean to spike as high as $3 a pound -- $2 more than what a pound of Robusta would cost. This compares to a five-year historical trend of Arabica costing closer to 70 cents more than Robusta. In recent weeks, the trend has reversed, with Arabica prices falling to just a 62-cent premium over Robusta.
In simple terms, inflation is already around us, though it’s not yet showing up in LITERAL price hikes. Instead, we’re all paying MORE for LESS. And it’s only a matter of time before the situation really gets out of control.
As you likely know, nothing protects from inflation like Gold. Many analysts believe that the precious metal is DEAD due to its having fallen from a record high of $1900 per ounce to roughly $1300 per ounce today (a 36% drop).
However, this price movement, while dramatic, is quite inline with how commodities trade. Gold has already posted one drop of 28% (in 2008) during its bull market, before more than doubling in price. This latest drop is not much larger.
Moreover, a 36% drop in prices is nothing in comparison to what happened during that last great bull market in Gold back in the 1970s. At that time, Gold staged a collapse of nearly 50%. But after this collapse, it began its next leg up, exploding 750% higher from August ’76 to January 1980.
With that in mind, I believe the next leg up in Gold could very well be the BIG one. Indeed, based on the US Federal Reserve’s money printing alone Gold should be at $1800 per ounce today.
Since the Crash hit in 2008, the price of Gold has been very closely correlated to the Fed’s balance sheet expansion. Put another way, the more money the Fed printed, the higher the price of Gold went.
Gold did become overextended relative to the Fed’s balance sheet in 2011 when it entered a bubble with Silver. However, with the Fed now printing some $35 billion per month, the precious metal is now significantly undervalued relative to the Fed’s balance sheet.
Indeed, for Gold to even realign based on the Fed’s actions, it would need to be north of $1,900. That’s a full 35% higher than where it trades today (see below).

This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.
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Best Regards
Phoenix Capital Research
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Isn't the correct question to ask where gold should be priced relative to ALL outstanding credit of ALL major nations?
What do you price Au in? Other PM's, only ounces count.
I was talking to "partial-sheeple" friend the other day and he asked something profound:
"If gold (and silver) should be much higher because of manipulation, how much higher should it be if the Chinese government and other governments hold much of what is available and won't allow it into the market?"
How much higher indeed?!
As long as gold derivatives (paper gold) are accepted as equal to physical then keeping the price down is easy. They will just make more paper promises.
Real physical simply cannot be used by the truly wealthy because it cannot be had, not at 1300 per ounce.
You or I can still buy a few ounces but ask your billionaire friends why they buy antiques and collector cars. Yes they are cool but they certainly do not have less risk than gold. They buy these things because when they tried to buy gold they were politely told they could only have unallocated. Go ahead, put in an order for 5 tons. Let me know who calls you to ask you to become a team player and not upset the fragile system in which paper promises are the way we now do busness.
Demanding physical is essentially tearing dowwn the dollars last defenses.
Imagine the king of Saudi Arabia....after a few years he looks at his assets and see that all he really has is a promise from his close friend and ally that someday he'll receive real wealth for those billions in paper he has. Every day more paper promises arrive. After he has everything he needs he just accumulates more paper. At what point do major net producers want more than just paper? The Saudis decided on day one. They saw the future and have always demanded gold. They take paper that they can spend but for the excess that they will save...they still want gold.
I suspect that all the gold on the planet is going to China and the Saudis. This is why New York real estate, fine old wines, collectibles and farm land are all selling well. The real wealth asset is not available. the price is so low that no one who has any will sell except in emergencies.
It is up to these major producers to demand change. You and I can still buy the 22,000 ounces at APMEX but large tonage is out of the question.
The GLD inventory has fallen since 2012 by 550 tons. But in 2014 the drop stopped. I think this means that the Chinese now own the gold in GLD. I do not know this but something happened to halt the depletion of GLD inventory. In 2013 Chinese imports of gold soared. This year GLD has lost only 25 tons. Who is supplying the gold to major producers now that GLD holdings are not being lost?
Something very strange is happening,. Viewing gold as a minor commodity is not the correct way to look at gold. There are major problems with the flow of gold and gold is, as it always has been, the primo wealth asset. Americans don't see this and that blind spot will eventually cripple our economy.
Interesting points. Thanks for writing.
Do you see China taking up the US FED/WS role of using their physical base to keep the price of Gold down?
Based on Au $1300 Ag $20
A rough calculation based on all gold & silver above ground.
777,276 tons silver - 24990006357oz - $499800127140
166,500 tons gold - 5353099875oz - $6959029837500
Total $7,458,829,964,640
Derivitives - Notional - $1,000,000,000,000,000
Note the zeros hanging out at the right.
Calculations based on the stock of above ground metal are almost useless. It is only the metal that will flow at these prices that count. I'm guessing that no central bank would seel at these prices and most of the wealthy, who by definition do not need to sell, won't either. Almost all physical flowing is from mines. Even scrap gold is down. Some will get desperate but most of today's holders of gold will sit very tight until gold is restored to it best role. It will again have to become a functioning flowing wealth asset. Patience.
7000$. This concludes this comment.
$1900 fair value?! I thought it was supposed to go to infinity. Stackers will be unhappy to hear this.
It is a very low target. For one, the Fed balance sheet is about 100x bigger than that. And two, the relative comparison difference is much bigger when taken back farther in time.
When you think about it, the way inflation metrics are handled, especially toward substitution having no effect on anything (except producer cost), central bank inflation rules are aimed at bringing in Communism.
Central Banks have done more to push the basic public (not the .01%) into the effects of communism. Lousy products, minimal differentiation.....
More reasons to criticize the Greenspam, the Bernank and Old Yellen
Fed's Balance Sheet !!!!!!!!!!!!!!!!
One needs to have Mental ImBalance to believe it.
When it comes to Potato-chip bags, it's not even 50% it's like75% Air, not to mention Soft-Drinks which are 90% Water and 9% Sugar + 1% Flavour, you have to have an Upper-Class income to afford anything resembling Nutritious and Healthy Food, everything else is just stuffed either with Sugar or some kind of Pulp.
Or pink slime.
Debt is money. If the debt system collapses, the money supply collapses, and the price of gold falls. The only way gold rises is if debt is replaced with paper currency.
Debt is anti-money, it's purpose is to destroy some balances & move others (a smaller sum) of real money (resources).
You fail.
Money is indeed now debt including currency which is just debt of zero duration. But once the world passes back through the looking glass, no money is debt and no fiat currency is money.
What exactly are you pricing gold in then?
The stuff he's smoking.
Strawmen
Non-sequiturs
Bitcoin?
Tulips
Quatloos!
OOoohhhh... a hybrid...
QUATULIPS.
Once the price FIXing is over the REAL price of Gold may be revealed to us all.
Gold tracked money printing fairly well....until they ran out of ways to cover their gold arses and had to instead go to heavy naked short selling.....
Now they are truly fucked....no way gold can be covered.
i think the only way out is to actually make it part of the currency, in some way.
Because of the uncertainty in today's market and the direction events might take the subject of "value and worth" continues to garner a great amount of interest and remains relevant. History is chucked full of distorted markets, debts unpaid, promises unfilled, and bubbles.
These "interesting times" play havoc with the value of things and what they are worth. Like some of the cruel games children play you don't want to find yourself without a chair or holding the "hot potato" when the game ends. More on this important subject in the article below.
http://brucewilds.blogspot.com/2014/05/value-and-worth-constantly-change...
Gold should be higher. Got it.
duplicate
The break between Gold price and FED PRINTING money may have been broken first by the huge use of derivatives.
The use of derivatives means any link between the two will not be linear, it will be exponential....
Then when you add in the FACT that normal laws of COLLATERAL have been broken, all hell has to break loose.
I am feeling the Heat already, RaceToTheBottom....
Hell on earth?
Correct.
Full faith and credit...
Tick tock motherfuckers.