The Imminent $2.5 Trillion Debt Ceiling Hike Will Unleash A Gold Price Surge To $1,950 And Higher

Tyler Durden's picture

Two weeks ago we presented a chart that shows the uncanny correlation between the debt ceiling and the price of gold. Now that we know the final amount of the next debt ceiling hike, somewhere in the $2.5 trillion ballpark, it allows us to extrapolate where gold will end up as a result of the debt ceiling hike which will likely be voted into law at 7pm PDT. A simple correlation rule of thumb allows us to predict that gold will be at $1,950 by the end of the year if it simply retains it close correlation to the debt ceiling. Should Bernanke announce that he will additionally need to monetize some or all of this incremental debt amount, we anticipate that gold will be well over $2,000 by the end of the year, courtesy of yet another round of accelerated dollar debasement, which also means that real gains in US stocks will be negated courtesy of the devaluation of the currency in which they are priced. The same, however, does not apply for gold, which with every passing day is priced in nothing but itself.

The Bloomberg chart of the day first presented on July 20.

And our revised version including the projected gold price.

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Fish Gone Bad's picture

I am sooooooo glad I figured out how to strip copper metal away from gold. 

bankrupt JPM buy silver's picture

THIS IS ALL WRONG! Ned Schmidt just said to sell your gold and silver for dunkin donuts stock.  This is not a joke.

akak's picture

Ned Schmidt is an arrogant and ignorant old fool who is only one small step away from Jon Nadler in his willful ignorance of monetary history and in his venomous dismissal if not hatred of those who wisely advocate the buying and holding of gold and silver during times of economic and monetary upheaval and insanity, such as the present.

I have had two separate email exchanges with this arrogant and blinkered bastard (one to politely correct an error in one of his grossly confusing and cryptically labeled graphs, upon which he almost psychotically outright attacked me), and in his flippant and irrational replies he came across so much like Jon Nadler (with whom I have had several more, and much more lengthy, exchanges) that I have to wonder if the two men are not in fact the same disingenuous anti-gold propagandist.

High Plains Drifter's picture

would you mind showing us some examples?   or is totally private?  if so i can understand.  today , i just need a good laugh........

akak's picture

Sadly, I cannot provide such examples, as I did not save my email exchanges with Ned Schmidt.

I did, however, save some of my email exchanges with Jon Nadler (even having posted them in two online forums for all to read, LOL), and they are positively surreal in their disingenuous evasions, malicious half-truths and lies, and flat-our irrationality and denials of reality.

MrJingles's picture

False prophets Bitchez!!

High Plains Drifter's picture

yeh nadler is a piece of work. i remember not long ago,  he and mish shedlock got to be real good buddies as they attempted to gang up on the gold bugs etc...........yep i remember it like it was yesterday. 



interesting photo collection. modern day detroit. what is coming to this land from sea to shining sea. for all to see. just remember this. you are going to have to be real tough and it is not going to be easy to stay above ground.

akak's picture

I used to frequently drive by many of those ruins of Detroit, and I can confidently state that NOBODY who has not seen them, and the city of Detroit in the entirety of its decay, can possibly comprehend just how profoundly a once-great city that was a vibrant manufacturing hub just half a century ago is now a rusting, collapsing, hopeless, utterly depressing empty husk of what it once was.  The only fundamental difference between the wreck of the Titanic and the city of Detroit is 13,000 feet of elevation and several thousand miles.

living on the edge's picture

I traveled to Detroit on business over the years and at one time careers were made or lost in Detroit. I came from the steel industry and I am both saddened and appalled at what remains of this once great industrial city.

Freddie's picture

The only good thing about Detroit is more and more is being bulldozed or old houses are being overtaken by trees.  Let nature take it back.  Today - I felt a bit like the passengers on The Titanic must of felt w/o the terror that is probably coming.  Just total hopelessness.  Less than three years to totally destroy what was sort of a civilization.   

Bay of Pigs's picture

HPD, I gave up trying to educate Shedlock on gold and silver. He's irrelevant on those topics. Schmidt and I had a run in years ago as well. And Nadler, well, need to talk about that clown....

Real Estate Geek's picture

That Detroit photo gallery included two pics of abandoned, garbage-strewn libraries.  Each still had hundreds of books--untouched.


"Them books be like Kryptonite."

Savyindallas's picture

Let me get this straight  -to summarize, are you saying that Ned Scmidt is an ignorant asshole? 

akak's picture


And besides that, he STILL can't seem to figure out when to use "a", "an" and "the" in his missives, displaying a positively Slavic disregard (despite his Germanic surname) for the definite and indefinite articles that can sometimes leave the reader scratching his head in confusion.

(Note: the Slavic languages do not have any equivalents to the English words "a", "an" or "the", leading native-born Slavic speakers to frequently leave them out or misuse them when they speak and write English or the Romance languages.  How they manage to get by in their own languages without the use of definite and indefinite articles is quite beyond me.)

e_goldstein's picture

gold near 2K? Who would have thunk it? Certainly not us :/

Rodent Freikorps's picture

Copper Melting Point: 1083.0 °C (1356.15 K, 1981.4 °F)

Gold Melting Point: 1064.43 °C (1337.5801 K, 1947.9741 °F)

Like that's hard.


DoChenRollingBearing's picture

"Everything else  will be left behind when the Gold Mothership takes off."

-- Zero Hedge member Gordon_Gekko.


How about: 

$55,000 / oz

GetZeeGold's picture


Front running the ceiling hike bitchez.


Chappaquiddick's picture

How about $350,000/toz??  40 years and 10^4 devaluation.

High Plains Drifter's picture

when he supposedly drove off the bridge, how much water was under that bridge?

e_goldstein's picture

Why, I think then, I could totally afford those serfs that I always wanted. Certainly beats toiling in the fields.

mayhem_korner's picture

When is $/oz price going to exceed the number of the year?

Dec. 2011?  Feb 2012? 

Aquiloaster's picture

When is $/oz going to be a useless metric? Perhaps barrels of oil/oz or bushels of wheat/oz gold will be a more useful measure in the coming few years.

nmewn's picture


And this..."courtesy of yet another round of accelerated dollar debasement, which also means that real gains in US stocks will be negated courtesy of the devaluation of the currency in which they are priced. The same, however, does not apply for gold, which with every passing day is priced in nothing but itself."

Something the Leo's & Robos of the world will never caged hamsters running on their wheel ;-)

Bobbyrib's picture

I hope the dollar keeps value for a long time. When it does collapse, it's confiscation time.

Pladizow's picture

?Top 20 quotes on gold going over $1600



"Ron Paul last week asked Chairman Bernanke during the Humphrey Hawkins type hearings if he thought gold was money and he (Bernanke) said, 'no.' My answer would have been, it's better than money. Yes, $1,600 gold is insulting central bankers in the following fashion, it's saying gold is going up because what you are doing to the fiat currencies of the world is not tolerable to smart investors."


      Rick Santelli, CNBC analyst


    "They'll print money until we run out of trees."

    Jimmy Rogers


"[I]n 1980 the only players were the Americans, they were essentially the only players in the gold market, or the dominant players. Today the dominant players are China and India, 58% of all the gold sold this year will be sold in these two countries. So they are by far the dominant players and as I've said the Chinese love gambling. When we reach that phase (the mania) I told you and I will tell anyone who wants to listen, watch out because it will truly make your head spin."

Pierre Lassonde, famed mining entrepreneur


"I pay attention to the price of gold. But I think it reflects a lot of things. It reflects global uncertainties. I think the reason people hold gold is as protection against of what we call tail risks, really, really bad outcomes. And to the extent that the last few years have made people more worried about the potential of a major crisis then they have gold as a protection."

Ben Bernanke, Fed chairman


"China's frenzy for gold prompted the central bank to step up sales this year of gold and silver Panda Coins.The People's Bank of China plans to sell 500,000 1-ounce gold coins, or 66 percent more than its earlier target of 300,000. It also tripled sales targets for half-ounce, quarter-ounce, 1/10-ounce, and 1/20-ounce gold coins to 600,000 each from 200,000 earlier."

Reuters report, 7/21/11


"Record high prices won't scare away [Chinese] investors, Investors are likely to chase the rally and continue to buy gold because paper money feels increasingly worthless and they are worried about inflation."

Shi Heqing, Antaike - China state-backed metals consultancy


"I think it was the foundation for people to start thinking that maybe gold's not headed to $1,650 an ounce or $1,700 an ounce, maybe it is headed toward $1,800 an ounce or even $2,000 an ounce."

Michael Jansen, J.P. Morgan


"A close above $1,600 on gold, similar to silver closing over $40, would create a huge bunch of short-covering. The commercials have been adding short positions in gold, but should we get a close above $1,600, I think you will find the smaller of those shorts are going to start covering their shorts because it's going to be too much pain. This could result in a $50 move overnight."

Anonymous London gold trader quoted at King's World News


"If you held gold or silver, it was a pretty good week. If you own your own house, it pretty much amounts to where you live. If you live in Vegas or Phoenix, you bought in the wrong area. If you bought in San Diego or San Francisco you've done right. If you saved your dollars for "a rainy day," you probably wonder what you can buy with your dollars. If you saved your gold for your old age, you've probably already sold your gold for dollars, and what the hell, 'let it rain.'"

Richard Russell, the dean of investment newsletter writers


"Warren Buffett's problem is that he only understands balance sheets and earnings. The value of a Picasso or a gem diamond or a bar of gold is outside Buffett's understanding. Which is sad, because Buffett's lack of understanding has kept many an American on the sidelines while gold surged higher in terms of Buffett's beloved paper currencies."

Richard Russell, the dean of investment newsletter writers


"Central banks have the will to increase gold holdings, but it is not a practical option and rather difficult. Gold supply simply doesn't grow as fast as China's foreign reserves. Only the increase in U.S. debt can match that. . .We can buy whatever with our money without causing price distortion, but a $2-trillion, $3-trillion [gold purchase] elephant will certainly cause distortion."

Dong Tao, Credit Suisse


"One of the big US banks texted me today to say that if QE3 actually happens, . . We could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money."

Peter Hambro, chairman, Petropavolsk


"We expect $1900 gold by October."

John Taylor, FX Concepts


"[As an option] the US Treasury could eliminate the Fed's entire holding of Treasury bonds at a stroke, gaining an extra two years. This would be a simple accounting transaction. Ben Bernanke might feel uncomfortable, and gold might blast to $3,000, but the Bernanke Fed has proved itself supple."

Ambrose Evans-Pritchard, The Telegraph


"The 'fiat' dollar is one of the world's astounding monetary creations. That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It'll be 40 years next month that the dollar has been purely faith-based. I don't believe for a moment it's destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded, and so destructive of the economic activity they are supposed to support and nurture that they will be replaced by something better."

James Grant, Grant's Interest Rate Observer


"I think there's a really high chance, this is the year that you do not want to fight the gold market. This is a trend that you just have to bite the bullet and be invested and go with it, I feel very strongly about that. Various liquidity is going to be coming from all corners of the world. At no time has gold pulled back throughout any of this credit tightening process, the market is going higher. We are in my opinion going to see a $2,000 handle this year."

Ben Davies, Hinde Capital


"I just calculated if we take an average gold price of say around $350 in the 1980s and then we compare that to the average monetary base in the 1980s, and to the average U.S. government debt in the 1980s. But if I compare this to the price of gold to these government debts and monetary base, then gold hasn't gone up at all. It's gone actually against these monetary aggregates and against debt it has actually gone down. So I could make the case that probably gold is today very inexpensive."

Marc Faber, The Boom, Gloom and Doom Report


"We have liked gold for a long time and we remain very constructive. It is more than just a hedge against recurring bouts of global financial volatility. The growth rate of gold production is roughly stagnant while the growth rate of fiat currency in most parts of the world continues to accelerate. It's all about relative supply curves - the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple."

David Rosenberg


"Internationally, precious metals will become the preferred reserve assets, not just an important one. Their prices will then relate more closely to the total volumes of each international currency in the world. As you can imagine, the prices of precious metals will then have to be higher than most people even thought possible. With the gold market being such a small one in volume terms, silver will then become a monetary metal too, at considerably higher prices."

Julian Phillips,?Gold Forecaster


"July/August is traditionally a weak time for gold. Purchasing from Asia - perhaps the main gold price driver - falls off, picking up again once festival seasons start in late Summer/early Autumn. Yet gold is standing at an all-time high as August approaches. That should indeed be telling us something. The chickens are coming home to roost and gold will continue to be the major beneficiary. This writer was looking to see gold in the $1700s by year-end in Mineweb's January gold price competition. This is beginning to look as if it could be a very conservative prediction indeed!"

Lawrence Willliams, Mineweb

SovietCong's picture

Nice quotes, but your post is sure longer than the whole Raise the Debt Ceiling Act. Looks kind of spamish to me, dude.

fuu's picture

You couldn't just post a link?

PhysicalRealm's picture

I agree -- and I hate it when people steal material.  Here's the link for the piece you re-published, which was easy to find via Google.


(looong time lurker; first time poster)

SwingForce's picture

Put a muzzle on it, or a bra maybe. Ever heard this one>> More than a mouthful is wasted? Oops, wrong quote, sorry. 

"Extreme Opinions, shared widely, constitute the single most reliable indicator of an impending change of direction for a market." 

Or how about this, "I'll put one in my ear, the other in my mouth, and I'll phone home...." Honey, hush.

So Close's picture

Define widley.  If it is widely known by your wife's girlfeinds she is having an affair is that different than if it widley known by everybody in town that she is cheating on you?  Understand the scope of your truisms before you start throwing them around.   Marc Faber travels WIDELY around the world.  He to this day asks his very well heeled audiences how many people actually own gold as part of their portfolios.  There have not yet been more than 2 or 3% that raise their hand.  Just because it is widely known among fiscal conservatives that this fiat ponzi can not run forever does not mean that the general public understands or is seeking to profit from it yet. 

SwingForce's picture

Widely is spelled correctly 62.5% of the time by you. Gold cannot be held wildly (sp) just becuz' there ain't enuf ot it!

How about as it refers to GOLD on this website, WIDELY is 99.9% of you sheeps who can't spell. In the words of Sean Connery, Suck it , Trabeck!

GoinFawr's picture

Sos un perdedor

SF, I think there may be a widely held opinion on ZH that you have been widely accepted as an outspoken gold bear for a widely extended period of time, and if your paper promises have been where your wide mouth is that whole time the red side of your ledger must be widening at a wildly terrifying pace; IE you've been consistently WRONG. So since Costanza-ing you has been so widely wildly successful, who's really the ovine here, primate?

In the time of Chimpanzees, are you a monkey?

Yen Cross's picture

  You get a gold star for having "BRASS " TOOLS!!! 


                                                                        YEN +!

FlyPaper's picture

Thanks for posting the quotes~

Mike2756's picture

That would put the dollar index in the low 60's?

Manthong's picture

Very possibly.. and silver solidly at $ 50.00 assumming 40:1 G/S.

But I should think even higher by then as the secret of the shiney stuff really starts to get out.

chinaguy's picture

CHF has been loving it...

margaris's picture


The swiss laugh at the gold price.... because lucky for them its debased in dollars, not franks. Tee-Hee!

swissaustrian's picture

We laugh at the price of the CHF. Totally overvalued fiat issued by a central bank hoarding 200 billion in EUR + USD and 8 billion of toxic UBS MBS/ABS-trash. For such a small country this is a huge amount of garbage. Once UBS and CS "need" a bail out, the chf-bubble is going to burst. Additionally, we have a huge real estate bubble forming.

For us all this just means buying opportunities in gold...

DoChenRollingBearing's picture

Gold is going to the moon, Alice.

Doña K's picture

If I were the swiss central banker, considering that the Frank is going so strong, I would print and print Swiss Franks, flood the market and start buying Gold, silver, Platinum, Paladium, and all other strategic metals I can get my hands on.

Same with Japan. 87yen/dollar is just ridiculous for a country that is going bankrupt. Start buying PM's, mines and other recources with printed money.


swissaustrian's picture

UBS made a similar suggestion.

They said that the swiss government should set up a sovereign investment fund.

magpie's picture

which will invest in US treasuries and Chinese RE ?

swissaustrian's picture

No, thats what the SNB does.

The proposal says it should be a broadly diversified portfolio of asset denominated in fx, meaning stocks, bonds, and commodities.

something like this:

Yen Cross's picture

  BRZ comes to mind... It would go along way on that fx and import tax?