In Case Of NEW QE, Gold To $1,900-$8,500 Says SocGen

Tyler Durden's picture


In a previous post we showed how, despite Goldman's best wishes, the market may have just priced itself out of a treat from the Fed tomorrow, and right into a trick. That said, in case the Fed has in fact succumbed to the pleadings of its superiors (read Primary Dealers) and does proceed with some seriously unsterilized dollar mauling, the next question is what is the best hedge. SocGen asked the same, and provided several strategies to take advantage of central planners exhibiting a rare case of Einstein's definition on insanity... over and over. Their "Strategy #1: Bolster Positions In Gold Ahead of QE3." Why? Because once the next round of the gold juggernaut is unleashed, gold may go to anywhere between $1900, just shy of the all time nominal high, and $8500... just a tad higher than the nominal high.

From SocGen:

  • USD 1900/Oz: To close the gap with the monetary base increase since July 2007, gold would have to rise to $1,900/oz, assuming full transmission from the monetary base increase to the gold price
  • USD 8500/Oz: If gold catches up with the increase in the monetary base
    since 1920 (as it did in the early 80s), its price would rise to USD 8500/Oz.

The latter scenario is the price only catching up with where it should be. Add another $700 billion - $1 trillion for a potential NEW QE, and you get a 5 digit (and increasingly more meaningless) number.

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Tue, 06/19/2012 - 18:33 | 2541055 dlmaniac
dlmaniac's picture

There will not be QE until the market screams, say, in dangerous of falling below 10,000 pts.

Tue, 06/19/2012 - 18:54 | 2541098 iDealMeat
iDealMeat's picture

Regardless of QE.

I think the Chinese interest in PMs will keep them manipulated in the range they are now through the JPM proxy.

Keep buying until O'bRomney gets elected and then watch them go FIAT parabolic. 

Question is: Would you ever sell anyway?


Tue, 06/19/2012 - 18:57 | 2541116 SHEEPFUKKER

Clearly, the Fed has boxed themselves into a corner with all of the manipulation of markets.  If they don't announce anything overt tomorrow, then won't they officially render themselves useless? Their self imposed dual mandate says price stability and full employment.  Uh, I'm pretty sure we are not at full employment....closer to full UN-employment....and prices are anything but stable. So the question is......What is the point of the Fed if they don't do anything overtly? I think they will answer that question on Wednesday.....i.e. there is no point to the Fed and they can go ahead and grab their ankles and kiss their asses and their fucking worthless FDR's least that is what should happen in a sane world. But alas, it is not. 

Tue, 06/19/2012 - 19:53 | 2541264 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Sell miners!  Gartman just went long!

Dennis Gartman - Major Shift in Gold Trade:

Tue, 06/19/2012 - 20:25 | 2541372 AnonymousCitizen
AnonymousCitizen's picture

$1900 - $8500??? As targets go, that's a fairly broad side of a large farm building.

Oh, hi all. First time posting here. How deep can you nest comments?

Tue, 06/19/2012 - 20:59 | 2541485 dbomb12
dbomb12's picture

How about $20,000  Great video from Mike maloney if you have an hour to kill its very accurate

Tue, 06/19/2012 - 21:11 | 2541525 smiler03
smiler03's picture

How about $2 trillion? How about getting a brain cell transplant.

Tue, 06/19/2012 - 23:23 | 2541865 iDealMeat
iDealMeat's picture

+1, It's all BS..

Tue, 06/19/2012 - 23:54 | 2541967 flacon
flacon's picture


Wed, 06/20/2012 - 00:57 | 2542090 SilverIsKing
SilverIsKing's picture

How is the US Treasury funding the $1+ trillion deficit each year?


QE never ends.

Tue, 06/19/2012 - 20:25 | 2541376 Bay of Pigs
Bay of Pigs's picture

Broken Clock Theory?

Tue, 06/19/2012 - 21:20 | 2541544 AllWorkedUp
AllWorkedUp's picture

 That really blows. He's always wrong. Crap

Tue, 06/19/2012 - 23:32 | 2541866 Lore
Lore's picture

Re: Gartman

Few weeks ago he announced that gold was in a bear market. 

Gartman seems to practice the "rhythm method" of forecasting: his position depends on time of month.

Leave us not forget the weather. And sponsorship?

At least he covers all the bases. If you flip-flop, you're right half the time.

Why the talking heads bother is a mystery.

Tue, 06/19/2012 - 22:38 | 2541746 jekyll island
jekyll island's picture

I may suggest a hedge if you want to sell the mining stocks:  buy the $52 call options on GDX, just in case Gartman is a blind squirrel who finally found a nut.  

Tue, 06/19/2012 - 23:14 | 2541839 cornflakesdisease
cornflakesdisease's picture

I've wained on Martan Armstrong's views over the years.  He's bitter and inflexible in his thinking. 

Wed, 06/20/2012 - 06:53 | 2542390 ParkAveFlasher
ParkAveFlasher's picture

sadly enough, i could believe he flinches anytime someone rattlestheir car keys.  how much time did he spend in prison again?

Tue, 06/19/2012 - 19:04 | 2541132 SHEEPFUKKER


Tue, 06/19/2012 - 19:19 | 2541175 UP Forester
UP Forester's picture

You won't take his FDR and raise him a JFK?

Tue, 06/19/2012 - 19:04 | 2541134 strannick
strannick's picture

QE to infinity and beyond!

Tue, 06/19/2012 - 19:11 | 2541154 Poor Grogman
Poor Grogman's picture

Is it worth running a sweepstakes that would allow ZHs to bet on the market trigger point for QE?

This would make the wait all that more exciting....

Tue, 06/19/2012 - 19:17 | 2541172 SHEEPFUKKER

ZH derivatives?? Brilliant!!

Tue, 06/19/2012 - 19:26 | 2541197 HD
HD's picture

...and if you lose - BAILOUT! Win-win.

Tue, 06/19/2012 - 19:33 | 2541211 Spastica Rex
Spastica Rex's picture

I'm in.

Tue, 06/19/2012 - 19:32 | 2541207 Peter Pan
Peter Pan's picture

They have us salivating like Pavlov's dog at the thought of $9000 gold. Don't be fooled. If anything, the mongrels in the central banks and JP Morgans of the world have enough magic shop tricks to hammer it down. If you have gold just sit back quietly like the guy who has the only parachute in a plane that has engine trouble. Gold is not about its short terms moves or even its great rise over the last decade. It's about what it will protect you from when the system goes off the tracks.

Tue, 06/19/2012 - 19:42 | 2541219 Gully Foyle
Gully Foyle's picture

Peter Pan

"It's about what it will protect you from when the system goes off the tracks."


Letter Re: The Bosnian Experience Wednesday, Dec 30, 2009

Mr. Rawles,
I want to thank you for having this site and presenting people with opportunity two obtain useful information that could save their lives one day. I have been dedicated reader of your blogs for some time and now think that is my time to contribute some information instead of just reading it. I have survived through collapse of former Yugoslavia and the years of war that followed after. I will try to cover as much of different topics that pertain to every day survival. No matter on how much the person is prepared, it might not be enough.

I was born and raised on farm in Western Bosnia and we always had enough food and supplies on the farm to survive at least one year without any contact with the outside world. We grew our own wheat and corn and always had enough flour for at least three years. We also had cows, chickens and sheep for dairy products, meat and eggs. The sugar and salt would be purchased in the 50 pound equivalent bags. Besides the motor vehicles we also had horses that could be used for farm work and transportation. We even made our own brandy and had at least three years supply of it. During the peaceful times, before the collapse, we only had one firearm, Yugo M57 Tokarev pistol, with about 50 rounds of ammo, but after the things started to go down the hill, are family arsenal improved. We added a Russian PPSH 41 [submachinegun], a Yugo M48 Mauser [bolt action rifle] and a Yugo SKS [semiautomatic] rifle to our arsenal, but we only had few hundred rounds for the each weapon. A lot of times it was really easy to obtain weapons but getting the decent amount of ammo was more challenging. My father was in the reserve status of Yugoslavian Army so he was issued a M48 Mauser but only got 40 rounds of ammunition with it.

When the things started to go bad, we were under impression that we would be okay; since we are on the farm and that we can just live there until everything was over. Boy, where we wrong. When the fighting broke out, the villages, small towns and farms were systematically cleared of people, looted and destroyed. You had a better chance of surviving if you lived in an apartment in the big city of if you lived in the farm that was further away from the front lines. It does not matter how good your house is built, it will not sustain few direct hits from the T-72 tank. Also, it does not matter how well you are armed, unless you have numbers on your side (number of armed people), and you dig in and try to protect your property, you will be over-run and destroyed. Yugoslavia had a fairly strict gun laws before the collapse, basically, you could own pistols, shotguns and bolt guns but after the collapse nearly everyone was equipped with selective fire battle rifles.

I would advise that you don’t keep everything that you have in one location. I was forced to leave my house and take off with just my backpack and weapon. If you can, keep a bug out bag [cached] a few miles away from your house so that you could go to it, if you are forced to abandon your residence. Be prepared to not return to your home for years and try to have another place to live in another part of the country or even some other country. I was not able to go back to my home until years later. Stash as much ammo in different locations as you can. I did not have enough ammo in the first place and whatever I had was used or traded within first month of me leaving my home. Ammo was good trading currency and could get you a meal at any time. Local paper currency was basically worthless but if you had foreign currency, then you were in better shape. At that time German Mark was most popular currency in Europe and could get you anything in former Yugoslavia during the war. The Gold and Silver were good to have but it was harder to find someone that would accept gold and silver as form of payment .

People that lived in big towns also had their share of problems. If they lived in apartment buildings, they were dependent on central heat and when the things started to go bad, there was no more fuel to heat these apartments. Not that many people had wood burning stoves and the winters in Eastern Europe can get really cold. I would advise that if you don’t have a wood burning stove, to get one and store it somewhere until you need it. You will need it not just for heat but also for cooking. The people that had stoves or were able to obtain them or make them then had another problem, getting the firewood. If you live inside of city that is surrounded and you can’t just go outside of city and cut some trees down, obtaining firewood can become your daily battle for survival. Burning your furniture, books, park benches, trees from the parks and every other tree that you can find will be normal. I would advise that if you are going to have a stove either store at least one winter supply of firewood (if you have a place to store it at) or have a plan where you get that firewood when you need it. Another issue that people from the cities faced was the shortage of water. Some people ended up digging wells in the courtyard of their apartment buildings but majority of people who tried this were unsuccessful since they were digging where there was not water or old city utilities were under the places where they tried to dig. Most of the people were forced to make daily runs to water points and bringing the water back to their families. Water points were favorite targets for snipers. Having extra water jugs will help you minimize your visits to water points.

Since this is my first post, I will not make it too long and will stop here until the next time. - A Bosnian Survivor

From a Sarajevo War Survivor

Jan 29 2012, 10:20 PM EST

From a Sarajevo War Survivor:
Experiencing horrible things that can happen in a war - death of parents and friends, hunger and malnutrition, endless freezing cold, fear, sniper attacks.

1. Stockpiling helps. but you never no how long trouble will last, so locate near renewable food sources.
2. Living near a well with a manual pump is like being in Eden.
3. After awhile, even gold can lose its luster. But there is no luxury in war quite like toilet paper. Its surplus value is greater than gold's.
4. If you had to go without one utility, lose electricity - it's the easiest to do without (unless you're in a very nice climate with no need for heat.)
5. Canned foods are awesome, especially if their contents are tasty without heating. One of the best things to stockpile is canned gravy - it makes a lot of the dry unappetizing things you find to eat in war somewhat edible. Only needs enough heat to "warm", not to cook. It's cheap too, especially if you buy it in bulk.
6. Bring some books - escapist ones like romance or mysteries become more valuable as the war continues. Sure, it's great to have a lot of survival guides, but you'll figure most of that out on your own anyway - trust me, you'll have a lot of time on your hands.
7. The feeling that you're human can fade pretty fast. I can't tell you how many people I knew who would have traded a much needed meal for just a little bit of toothpaste, rouge, soap or cologne. Not much point in fighting if you have to lose your humanity. These things are morale-builders like nothing else.
8. Slow burning candles and matches, matches, matches

3 Reasons You Shouldn’t Stock Precious Metals

The myth that stocking gold and other precious metals as a survival tool is perpetuated by survival blogs and message boards. Common sense shows that’s not a good idea and your hard earned money is better spent on food and gear.

1. Long Term Use

First, let’s look at history. You can study any group in the history of the world and see that gold, or any other currency, was never used until well after there was a stable and functioning society, usually with some form of government. Before that there is simply no need. People trade.

In the aftermath of any situation the most valuable commodities are going to be food, water, clothing, other things that human beings need for their immediate survival.

Invest in something you can actually use or people will actually want.

2. Prepare In Order

Some people will say: “Sure, it may take a while, but eventually precious metals will be currency”

I agree, but my question is: How long will that take? Does that mean you already have EVERYTHING you need to survive in the YEARS until then? I sure don’t.

If I made massive list of everything I wanted to prepare and it was in order of importance, precious metals would near the very bottom, somewhere around “Plans to build a printing press” and a copy John Locke’s Treatise On Government (all useful in a budding society, not so much for survival).

Common sense says you should prepare for what you will need first.

3. Cash Still Works

Let’s be honest: The most likely survival situation you will find yourself in will be regional. A massive flood, hurricane, or earthquake. What does that mean?

The rest of the world still takes cash.

I wrote about this in detail here: 7 Reason to Have Money In Your Bug Out Bag.

Level of Reason

After writing this I found out there are some other common sense survivalists out there who agree:

The Suburban Survivalist thinks along the same lines: Precious Metals Post-TEOTWAWKI; I Don’t Buy It

Scott, from Bug Out Survival, also wrote on the need for cash money on hand.

Tue, 06/19/2012 - 19:56 | 2541270 Peter Pan
Peter Pan's picture

Dear Gully Foyle,

I read with great interest what you wrote. It certainly makes sense especially during the period of upheavel but when things DO get back to normal, those stocks of toilet paper, brandy and bullets lose a great deal of their emergency value. That's when your gold truly kicks in. Post apocalypse.

But thank you again on a very interesting insight on the Bosnian experience. It is sad though how bullets, toilet paper etc go up in value whilst humanity, values and morals are totally devalued in war by the evil that resides in us.

Tue, 06/19/2012 - 22:05 | 2541660 francis_sawyer
francis_sawyer's picture

toilet paper is overrated in that scenario... America has dollars...

Wed, 06/20/2012 - 15:00 | 2544595 akak
akak's picture

What GullyFoil and other disingenuous and/or ignorant naysayers of gold do not understand, or refuse to acknowledge, is that gold is not just a means of financial survival during a period of economic crisis and monetary collapse, but much more importantly, holding gold (and silver) is a means of preserving one's savings and transferring them through a period of economic upheaval and monetary collapse. 

Where is the wealth and savings today of those Bosnians who chose to hold their national fiat currency in 1991, versus those who chose to hold gold instead?

Enough with this idiotic notion that gold is worthless merely because it may not be of paramount importance during a transitory crisis.  Is all artwork worthless simply because it has no value in a lifeboat?

Tue, 06/19/2012 - 20:01 | 2541285 post turtle saver
post turtle saver's picture

Good stuff and things I've touched on already... told ya toilet paper, drugs, alcohol, tobacco etc are more useful when TSHTF.

Tue, 06/19/2012 - 20:20 | 2541361 CPL
CPL's picture

From a Sarajevo War Survivor, you are missing the rest of it.  It was originally called the SARAJEVO SURVIVAL GUIDE.  The bullet list that gets rehashed is from some forum and not truely the way of how things happened.  If you want to read the history from how the universe worked after Tito, here you go.

Gold and silver were VERY important, for OIL, can't run tanks with out it, and a basic commodity like oil determines the outcome in the cold war.  Not "money".  Arabs then wanted gold.  The early 90's Canada was about to go over the rails.  The US was in a recession started by Bush The Elder.  Where the US army went, so did the banks.  All of them.  The reserve currency of Yugoslavia is anything of value that kills people.

From the first story, it depends who your family was.  Pardon who your family worshiped.  If you were muslim in Western Yugoslavia, the house would have been looted, boarded up, flattened and everyone killed.  Don't confuse today with Yugoslavia at all either.  Tito ruled that country with an iron fist.  While The muslims and christains are all busy pointing each other out in war crimes, believe me, Tito made them look like school girls.  To rule that shithole, you had to out do people that wire four year olds with explosives.   That situation after Tito is only a minor scuffle.  However, the Yugoslavian people will get their wish for iron fisted rule in the fashion they like, I understand there is a real popular extreme insane wingnut that is the new Kiaser Soze in rising.

Tue, 06/19/2012 - 21:17 | 2541374 BlandJoe24
BlandJoe24's picture

Thanks for posting this.  Also see the "40 Ways to Lose Your Future" and "How to Build a Lifeboat" as well as more detailed discussions of practical preparation (including how gold is the "icing on the cake" of preparations, not the bulk of the cake):

Tue, 06/19/2012 - 19:56 | 2541272 RiverRoad
RiverRoad's picture

Just to be on the safe side they hedge their shenanigans with gold:  No one knows better than they do the scam they're running.

Tue, 06/19/2012 - 18:59 | 2541122 DoChenRollingBearing
DoChenRollingBearing's picture

@ iDeal

+ 1

That's what FOFOA says will happen.  People will want the physical, and there will be no sellers.  BOOM!

Tue, 06/19/2012 - 19:05 | 2541138 LowProfile
LowProfile's picture

We are some time away from that yet IMO.

First, the last of the weak hands must be shaken out.  Perhaps several times.

BTW, IMO no QE means AU takes it right in the nutz, and will present the last best entry near these price levels.

Tue, 06/19/2012 - 19:21 | 2541182 LowProfile
LowProfile's picture

Wish there was a way to delete accidental duplicate posts...

Tue, 06/19/2012 - 20:01 | 2541283 RiverRoad
RiverRoad's picture

It's deja vu.

Tue, 06/19/2012 - 19:10 | 2541156 DrunkenPleb
DrunkenPleb's picture

Question is: Would you ever sell anyway?


Absolutely: gold is just a form of money. When other assets are crashing and gold soaring, exchange gold for other tangible things you want. Personally I do not yet own property, and I plan to exchange at least some portion of my gold holdings for property at some point in the future.

Tue, 06/19/2012 - 19:14 | 2541163 dlmaniac
dlmaniac's picture

The question is how much gain government will allow you to keep when you sell your gold. You can bet they won't sit there letting you collect it easy.

Wed, 06/20/2012 - 00:42 | 2542063 DrunkenPleb
DrunkenPleb's picture

Good thing I don't live in the US - in my jurisdiction the government still has a healthy respect for property rights.

Wed, 06/20/2012 - 08:28 | 2542561 ATM
ATM's picture

For now. That means your conditions are even more dangerous. They are leading you to a very false sense of security. Be skeptical.

Wed, 06/20/2012 - 01:52 | 2542158 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

Perhaps the seller just might give you an 80% discount on the price?  After all, you retributed with such a nice shiny gift.  

Wed, 06/20/2012 - 03:51 | 2542279 EmileLargo
EmileLargo's picture

I just bought more at $1635. The way I see it, they have to monetise. What it gets called is irrelevant.

Tue, 06/19/2012 - 18:51 | 2541099 Dr. Richard Head
Dr. Richard Head's picture

Nominally we are hovering near 13k, but in real inflation adjusted terms or using gold as a measuring stick we would see a 10k in my book. This bitch of a market has indeed fleeced "investors" through a scam of a facade.

Tue, 06/19/2012 - 19:20 | 2541179 CPL
CPL's picture

In terms of inflation adjustment if using physical asset classes, the dow is at 7000 and S&P is at 650.


The numbers really don't mean a hell of a lot anymore.


Tue, 06/19/2012 - 19:36 | 2541221 Spastica Rex
Spastica Rex's picture

Their Jedi mind tricks didn't work on you.

Tue, 06/19/2012 - 20:27 | 2541383 CPL
CPL's picture

These are not the bagholders you are looking for.  Move along.

Tue, 06/19/2012 - 19:45 | 2541242 El Oregonian
El Oregonian's picture

Crap! When has SocGen been right lately? There goes PM paper... Fortunately, Physicals are still physicals and STILL weigh the same regardless. I hold them as long term investments against inflation.

Tue, 06/19/2012 - 21:42 | 2541601 vast-dom
vast-dom's picture

flip a coin. no one knows anything anymore. if we would eliminate central planning we would have something like free markets again and a fuckload more rhyme and reason as barometer for sound investing.

shifting capital around to facilitate and foster productivity and legitimate econ growth is something that does not compute for Bernank and Co. 

Tue, 06/19/2012 - 18:34 | 2541057 Global Hunter
Global Hunter's picture

Any guesses on where oil goes in usd terms if gold goes to 8500?

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