US Money Supply Surges Surges 33% in 4 Months - Gold To Follow?

Tyler Durden's picture

From Gold Core

US Money Supply Surges Surges 33% in 4 Months – Global Money Supply to Lead to Gold $10,000/oz?

Gold is trading at USD 1,623.80, EUR 1,177.95, GBP 1,027.01, JPY 124,535.72, AUD 1587.39 and CNY 10,354/oz.

Gold’s London AM fix this morning was USD 1,623.00, GBP 1,027.02 and EUR 1178.14 per ounce.

Yesterday’s AM fix was USD 1,629.00, GBP 1,033.24 and EUR 1,180.17 per ounce.

U.S. M2 Money Supply: Accelerating Sharply in 2011

Gold prices are mixed today as markets remain on edge due to increasing divisions amongst European leaders on how to solve the intractable Eurozone debt crisis. There continues to be very strong demand for physical bullion globally and support is  strong at the $1,600 level due to this demand.

The sharp fall of copper yesterday, by 6%, is an indication that the US, Chinese and indeed global economy is very fragile and may soon begin to contract.

Physical demand in Asia, mainly India and China, has entered the traditional peak season with Indian festivals and the increasingly important Chinese New Year.

This is reflected in premiums in Asia which remain good. There are reports of massive physical buying out of China on gold’s fall close to $1,600 yesterday. The most active Shanghai gold futures traded at a premium of more than $10 over spot prices earlier today. The contract stood at 335.22 yuan a gram, or $1,634 an ounce, at a premium of $3.

Cross Currency Table

Premiums in Hanoi, Hong Kong, Singapore and Mumbai remain robust on continuing physical demand.

Demand from Asia is due primarily to concerns about fiat currencies – both domestic or local currencies but also the current reserve currencies of the euro and of course the global reserve currency the dollar.

China M2 Money Supply: M2 Growth is Decelerating, Yet Still Rising

While all the focus has been on the Eurozone debt crisis recently, the US is suffering a stealth debt crisis of its own which is being ignored - for the moment. As is the burgeoning debt crisis in China.

The US fiscal position is appalling with a $1.6 trillion deficit projected for fiscal 2012 alone. For those who have lost count, the US national debt has risen to over $14.8 trillion. The latest updated projections reveal that the US will reach a 100 percent debt to GDP ratio by Halloween – in 10 days time.

Gold’s recent weakness has coincided with a period of dollar strength but with trade and budget account deficits as far as the eye can see, this dollar strength is likely to be brief.

Indeed, the dollar’s recent strength is due to the fact that while the dollar’s fundamentals are very poor – its competing fiat currencies such as sterling and the euro have similar if not worse outlooks due to imprudent monetary policies.

The possibility that gold could surge to as high as $10,000/oz is gaining traction amongst some respected market participants.

Paul Brodsky, co-founder of QB Asset Management Company has again warned regarding the risks posed to US Treasuries and the possibility of a sharp revaluation of gold that could see gold reach $10,000/oz.

A twenty-year veteran of the bond market in his own right, Brodsky told King World News that the US may return to some form of Gold Standard in order to restore faith in the US dollar.

Proponents, including Steve Forbes and Ron Paul, argue a gold standard would prevent what they see as irresponsible money creation and force the U.S. to live within its means by limiting the amount of money monetary authorities can create.
The idea that the US could revalue gold and devalue the dollar (as was done by Roosevelt in the Great Depression) is gaining increasing currency.

Gold prices would hit $10,000 an ounce or even more should current calls for a return to the gold standard become reality, according to Brodsky.

In conversation with King World News, money manager, Stephen Leeb, said that gold is remarkably undervalued and “is going to add another digit over the next five to ten years there is very little doubt about that.”

Leeb recently said that gold could rise to $12,500/oz. He concluded this based on many of the factors documented by GoldCore in recent years such as gold in terms of financial assets, the monetary base and surging money supply globally.

As the ‘U.S. M2 Money Supply: Accelerating Sharply in 2011’ chart shows, US money supply (M2) has surged in a parabolic manner in the last few months and is up by more than 50% year to date and up 33% in just 4 months - from June 1st to October 1st.

For the latest news and commentary on financial markets and gold please follow us on Twitter

(Bloomberg) -- Gold Pares Worst Weekly Loss in a Month as Commodities Advance on EU Plan

(Reuters) -- Gold edges up on arbitrage buying

(MarketWatch) -- Gold futures rebound in electronic trading

(Bloomberg) -- South Korea to Drop Gold Rings from CPI Basket

(The Motley Fool) -- Why I Was Completely Wrong About Gold

(The Telegraph) -- Italian bond yields reach point of no return

(The Economic Collapse) -- The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System

(King World News) -- Dollar Devaluation Coming, Gold to be Revalued

Brodsky: Apropos of Everything (and Gold)

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GeezerGeek's picture

In response to what I infer from an above post, they were not printed just in the 1960s. They go back to around 1900 or earlier.

I hope I recall this stuff correctly:

Silver certificates were U.S. currency issued up to 1964. In 1964 one could walk into a bank and exchange a $1 silver certificate for a real $1 silver dollar. Silver dollars were still in circulation, although worth more as silver than as money. Silver certificates were essentially 'retired' when they ceased to be redeemable in silver. That was in 1968, I think, the same year I graduated from college. During the same approximate time span all U.S. silver-based coinage (dimes, quarters, half dollars) ceased to have silver as part of the content.

I was introduced to silver dollars around 1960, when my one grandfather gave each of his four grandchildren a bag of 100 silver dollars as a Christmas gift. My parents induced me to deposit most of them in a local savings & loan, but I insisted on keeping a dozen. Still have them. Back then there was no real point in having the heavy silver dollars when a piece of paper, redeemable in silver, fit in a wallet much better.

The other drawback to silver dollars was they were not good for stuffing under a mattress. Too lumpy. But they did keep their purchasing power: A dollar in 1960, silver or paper, could buy 4 or 5 gallons of gasoline. Today a silver dollar (assume one ounce of silver to make it simple) can buy 9 or 10 gallons of gasoline. Not so for paper dollars. Same holds true for other items: in 1962 a Ferrari 250GT went for all of $12,500. If my grandfather had given me 12,500 silver dollars rather than 100, I could have bought it with those silver dollars. In 2011 terms, I'd have nearly $400,000, and I think I could buy some Ferrari for that amount.

Maybe we need a modern day version of Bryant's Cross of Gold speech. Now it would be a Pile of Paper.

Snidley Whipsnae's picture

Bryan's 'cross of gold speech' was a stab wound to sound currency backed with gold/silver and eventually led to the destruction of sound dollars backed with PMs.

Sound money advocates are always over run by easy money advocates... and the results are what you are witness to now.

Easy money (fiat backed by nothing) allows future demand to be pulled into the present; ie, savings are not required when lots of 'easy credit' is available to anyone that can fog a mirror.

Fuck Bryan and the horse he rode in on... btw, his name is spelled BRYAN, not Bryant. 


Debtless's picture

US Money Supply Surges Surges 33% in 4 Months - Gold To Follow? Not if they can help it. That's for sure.

eddiebe's picture

The answer to the title question is:  Gold will follow when the Powers that be allow it to follow.

Snidley Whipsnae's picture

An alternate answer is "gold will surge when people lose faith in the dollar".

Otherwise known as hyper inflation.

Smiddywesson's picture

Theory vs. practice.

You are both right, and that is exactly the game that is being played.

Gold will surge when the central banks are forced to play their hand OR, if they are smart, they will step in before their hand is forced and announce a new gold standard, ramp the price of gold, and ensure by their positioning that they are the chief beneficiaries of the inevitable (and therefore survive this crisis). 

So as Snidely rightly pointed out, one of the things that will force their hand is people losing faith in the dollar.  Another is widespread political unrest/war, or a breakdown in the paper markets and a decoupling of paper from physical gold.  There's also a chance one of the co-conspirators (like China with the PAGE) will bring a very brittle gold suppression scheme to its knees when it suits them. 

This is why Ben stutters, he doesn't know if he will run out of time either.  He is playing a game of Three Card Monty on the tilting deck of the Titanic and the stakes are survival and continued domination of the world's money.

moskov's picture

US dollar is going to go back gold standard?


What gold standard? Those fake gold bars stored in Fort Knox and they have never been audited for years.....


Good luck with that. It's too late

s2man's picture

IF the gold is there, revaluing the dollar to, say, $6000/10z Au would make U.S. gold to debt ratio look good again, on the balance sheet.  And the poor bond holders would be paid back with dollars which are 1/4 of their previous value.  Albeit a stable, tiny dollar.

This, of course, could be viewed as a default.  Which way would the markets swing?  Stick with the now-stable dollar, or abandon the dollars, which all come flooding home and create instant hyperinflation in the U.S.?

Smiddywesson's picture

If I was a central banker, and I had almost 4 years to replace the gold, and access to unlimited reserve currency funds, and bail outs to empower the entities to whom I lent my gold to return it, and I knew the system was so awash in debt and derivatives that it couldn't be saved, I would start buying gold, encourage my counterparts to buy gold, and replace the gold that was supposed to be in my vaults.  The gold has been or is being replaced.

If all the central banks of the world are in on the plan, who will be left to call the shift to a gold referrenced system a default?  The ratings agencies?  The fiat currencies of all nations will undergo the transformation at the same time, so there should be no flooding back into their countries.  This is a global monetary debasement, consensual on the part of the banks, rape from the perspective of anyone without gold.

Which way would the markets swing?  I'm not sure that is the major consideration.  Preventing a market crash is important to create the illusion of a stable economy and to buy time.  Once the change is effected, the motivation is removed to hold markets up.  My guess is they would crash.

MissCellany's picture

I would start buying gold, encourage my counterparts to buy gold, and replace the gold that was supposed to be in my vaults.  The gold has been or is being replaced.

That's probably why they haven't allowed an audit of Fort Knox in decades. Hide the truth of what is (and isn't) really there in the vaults, AND hide how long ago the stuff that isn't there went "missing."

Smiddywesson's picture

And the loan sharks stall while bailing out their customers so they can put the gold back.

msmith's picture

Gold is likely headed higher for the days ahead.  "Risk On" price action to continue.

Matrix R Us's picture

The Gold mothership is still being fueled, but soon enough it will take off and leave all paper currencies behind!

Pick your seats bitchezzzz!

RobotTrader's picture

Gold is going to go wherever the economy and ES goes.

Strong economy = higher gold prices

Bank implosions and financial collapse = huge crash in gold prices

Snidley Whipsnae's picture

"Bank implosions and financial collapse = huge crash in gold prices"


Bank implosions and financial collapse = huge crash in PAPER gold prices...

fixed it for you robo... you're welcome.

oddjob's picture

If you throw your Gold out the window, it still wont fall as hard or as fast as Robo's Netflix.

s2man's picture

You left out the inflating monetary supply, the resulting price inflation, and the flight to safety (i.e. gold) = higher gold prices.

Hulk's picture

Au, Ag will be the last men standing...Robo to fade away and never be heard from again...

FEDbuster's picture

Pb and Cu alloys will play important roles in the future, too.

Smiddywesson's picture

Au, Ag will be the last men standing...Robo to fade away and never be heard from again...


No, Robo's job is to make you turn green.  I doubt very much Robo takes any of those trades.  Do you Robo? 

Hulk SMASH!!!!! 

jjsilver's picture

Are you basing this on the ongoing manipulation, or some secret fundamentals nobody knows about. Gold historically has performed better during deflation.

TheSilverJournal's picture

Gold has not moved with ES when looking over the last 10 yrs.

Dr Bob's picture

I have been following gold and silver pretty intensily for the past 3 years. i have read all the blogs and just about everything else i can get my hands on. i feel that i have a pretty good understanding of how and why the price moves. but what im really starting to realize is that nobody has a clue to what is going to happen. mainly because nothing is normal anymore. with the government and central banks so heavily involved with just about everything under the sun there is no telling what they are going to do. i keep hearing this cry for a return to a gold standard which in reality should happen. but im afraid we no longer live in reality. if i was the gov or a central bank, im thinking that a gold standard sucks for me. it would put a limit or cap on the money supply that i would have available to do what i please. there is only so much gold and silver available out there therefor i would only be able to print so much money. so in the eyes of a central banker or gov a gold standard would totally suck. so i dont see them doing it. this is why the euro is going to fail. europe has dug such a deep hole that they cant print their way out of it like the US can since its partially backed by gold. in reality they would therefor need more gold to print more euros (wondering what happened to momars gold?). unless i have missed something, which is possible, i havent heard of more euros being printed. and im assuming if they do print then the value of gold in euros should increase and therefor the euro should drop in relation to the dollar. so i just dont see a gold standard coming, i would love to see a gold standard cause i gots me some gold and silver stashed away. but this wouldnt benefit the TPTB. i think that the world is in deep shit and govs need a way out of the mess they have created. sadly i think WWIII will happen in the near future, this may see this as their only way out of this mess. but i could be wrong. its just that we dont live in reality anymore and i think you all know that. so a future gold standard?? i highly doubt it.

s2man's picture

+1 for "nobody has a clue to what is going to happen".  I doubt even Dr. copper's ability to foretell the future.  This is a new game, and all the old indicators are probably meaningless.

Snidley Whipsnae's picture

"but i could be wrong."

You are certainly right about that statement. As for the rest of your ramble... keep reading ans studying.

prole's picture

I agree with Bob above and Yellow below. There will be no gold standard (in law.) Side point- I do believe we already live in a de facto gold standard world, with fiat currencies floating against gold. Why would the JTB the 1% allow themselves to be chained down to a fixed gold standard? It would be stupid on their part. As it is now they can print paper for free, use the paper to buy real gold, and also tax the slaves to recall the paper. It is a perfect system for slavery forever. God my knees hurt.

Gavrikon's picture

". but what im really starting to realize is that nobody has a clue to what is going to happen. mainly because nothing is normal anymore. with the government and central banks so heavily involved with just about everything under the sun there is no telling what they are going to do."

Right there with you, Doc.  But still, I keep on accumulating.

monkeys.pick.bottoms's picture

WW3 not likely. All major powers too broke for a war. The first two wars were large scale thefts through inflation. You got inflation during and after those wars. No such trick possible this time. Apart from MENA - those guys still have money. Yes, I can see $200+ barrel of oil as a result of a Sunni-Shiia conflict.

Smiddywesson's picture

this is why the euro is going to fail. europe has dug such a deep hole that they cant print their way out of it like the US can since its partially backed by gold. in reality they would therefor need more gold to print

Agreed, we don't know the details of the new monetary system.  However, we have logic and some facts:

  • A true gold standard would handcuff TPTB to an extent, and they wouldn't want that, so we will get some sort of gold referrenced standard.  For us as individuals, the details of how the system works don't matter, what matters is for a change to a new system to make them any more solvent, the gold on the asset side of their balance sheet has to be worth exponentially more than today.
  • Central banks are buying, all of them, all over the world
  • Ben Bernanke lied about gold in his testimony with Ron Paul.  People like him don't lie about unimportant things.
  • The ECB is currently replacing the asset side of their balance sheet form gold and foreign currencies to just gold.  Last time I checked, assets were over 65% gold.  China is dumping foreign currencies too.

"(W)hat im really starting to realize is that nobody has a clue to what is going to happen..."

Not true.  Yes, you and I don't need to know the details of the next monetary system or what frankenstein's monster it will be in comparision to a true gold standard.  Ben and all the other central bankers know what is going to happen and they are stacking gold and lying about it.  that's the tell.  That's all you need to know to win this card game.   

Chaffinch's picture

I have re-watched that 'is gold money?' clip twice again today and I agree that BB is lying. He knows that Ron Paul's 5 minutes is nearly up and he plays for time - telling RP why he thinks people buy gold (tail risk etc.) when RP hasn't asked him that question. He looks off-balance, even though he has clearly anticipated being asked about gold and is ready with some gold-related waffle. His biggest pause is when RP asks him why CBs buy gold... my take on this is that RP is sounding like he is 'on to something' and BB is worried where it will lead to...

DaveyJones's picture

we don't live in reality, but reality lives in us. Some sort of standard must rise from the ash

Yellowhoard's picture

Be careful what you wish for with regards to a return to the gold standard.

It is far easier for the central bankers to corner the world's gold market than the silver market.

With the power to gun the price of gold up and down, they can continue their game of lend and deflate pretty much the same as they do now with fiat.

A silver standard would be better. A broad basket of commodities better yet.

GeezerGeek's picture

I'm not sure I understand why silver would be better than gold, since I read that silver is in much shorter supply than gold. If this is true, would it not be just as easy to manipulate the price of silver as it is to manipulate the price of gold? Couldn't TPTB just give silver a 40% haircut one day? Oh, wait, that really happened...

I'd be for a gold standard if we really have our gold in Ft. Knox, as they claim, and a law is passed prohibiting government confiscation of gold or anything else.

FEDbuster's picture

Let's just assume the dollar won't be tied to anything for the rest of it's reserve currency life (except maybe US Military strength).

I am supportive of Bill Still's solution to rid us of the FED, and our National Debt:

Would love to hear some feedback from ZHs on these ideas.

Snidley Whipsnae's picture

Over hundreds of years the ratio of silver:gold found in the earth has now been established at about 16:1.

Silver to gold prices have varied a great deal over thousands of years. If you read the history of the great Italian banking houses you will find that they manipulated the SUPPLY of silver to some countries that were on a silver standard, and silver has at times, in certain places, had greater purchasing power than gold. For instance, the Italian banks choked off the supply of silver to England at a time when gold was virtually unknown in England. This was done not to hurt the economy of England but to bankrupt a rival Italian banking house. Banksters...the azz hats never change. 

imo, one has to look at the situation from two perspectives... Central banks hold very little silver and silver is used up about as fast as it is mined...except that silver which is hoarded or used in flatware, etc.

Central banks (supposedly) hold about 30 per cent of all the gold ever mined... So, if any metal is monetized it will probably be gold first and silver will follow shortly there after.

Logic would indicate that the gold silver ratio will vary but will eventually settle back to the ratio in which each is found in, 16:1.

Smiddywesson's picture

Speaking of industries.  The historical 16:1 ratio would logically seem to be the reset ratio but inasmuch as silver is used up, and gold isn't, shouldn't that ratio drift over time?  Also, technology has greatly increased the rate at which silver is used up, so shouldn't that drift in the ratio increase?

I don't think they will need or want to monetize silver.  If they monetize silver, they can't manipulate the price at will because too many industries need it.  A scarcity of gold was a problem under the old gold standard.  We are in a digital world today.  Paper and plastic will retain their place as the unit of trade.  If not enough gold is available to fill their vaults, they will just ramp the price of gold manipulate their balance sheets.  The game under this system will be tipping off their cronies to these actions to extract money from the market.  It's no different than tipping them off about interventions in the fiat market.  At least initially, with the amount of debt in the world, they will only be able to use gold, because only gold can be inflated at will.  With complete control of our money, why would they further complicate things with silver?  Also, where is the evidence of central bank purchases of silver today?  If they announce a gold standard, all the cheap silver will be long gone.  If that was in the cards, they'd be buying.

Smiddywesson's picture

Be careful what you wish for with regards to a return to the gold standard.It is far easier for the central bankers to corner the world's gold market than the silver market.With the power to gun the price of gold up and down, they can continue their game of lend and deflate pretty much the same as they do now with fiat.A silver standard would be better. A broad basket of commodities better yet.

And that's exactly why you will never see a basket of commodities standard, it is harder to manipulate (and cheaper to fix gold prices than multiple larger markets).  It would destroy the world's economy if they ramped multiple commodities enough in such a system to make themselves solvent.  Gold, they can run as high as they need.  Only gold can be manipulated at will with limited real world repercussions to industry.  Plus, they have plenty of experience in manipulating gold, so yes, a return to a gold referrenced standard will be no heaven on earth.

Chaffinch's picture

How does a broad basket of commodities backed currency actually work. If I take my paper to the bank, to redeem it, do I carry away a selection of metals, plus a paper claim to redeem wheat, oil and coffee beans?

Tic tock's picture

33% in four months - does that make the Military a mercenary force? inquiring minds would like an answer.

lovedr's picture

I don't think a gold-standard currency is possible unless the entire planet adopted it...nations who weren't on the standard could (temporarily) print their way to prosperity.  This would benefit them until the always-delayed devaluation of their currency occurs.  In the case of the US, there isn't enough gold on the planet to back the currency that exists, let alone the debt that's sitting on "the books".

I don't think a gold-standard is going to be seen again for another reason: it takes the power of the press away from TPTB and they simply do not give up power.

I believe they're going to kick the can down the road as long as possible and when the house of cards is too tall to stand any longer, they'll announce a new world government, the formation of which will "require" the reset of all sovereign debt to "zero".  There will be a new world currency, etc. etc.  Bye-bye multi-trillion $$ deficits.

You are correct:  war is coming.

Snidley Whipsnae's picture

"I don't think"

Right you are, lovedoc.

MissCellany's picture

Oh, get over yourself, Snidley, you frigging piss-ant. [rolls eyes]

You can't even spell Snidely correctly.

Yellowhoard's picture

In the case of the US, there isn't enough gold on the planet to back the currency that exists, let alone the debt that's sitting on "the books".

Not true. It depends on the price of gold. If gold goes to $30,000 an ouce there will be plenty of gold to back our currency.

When the house of cards eventually collapses, gold will discover it's actual value in dollars.

FEDbuster's picture

Gold has a fairly constant value when not manipulated, it's the dollar's value that will change.

Smiddywesson's picture

Once again, Yellow is right.

If you back the currency with gold, and ramp the price of that gold, your balance sheet balances.  Instantly, all the little people without gold are poorer, and the people that matter, like the central banks, are solvent because wealth is now measured at the top in gold, not paper.  The paper will still exist, but the gold will determine how much it is worth. 

What you won't see is gold coins or any of that gold going out into the economy.  It will move between central banks, but that's it.  So scarcity of gold is not at all an issue in the digital age.

Monetary policy doesn't create wealth, it just moves it around, so gold itself is besides the issue.  If I hold the only one-eyed albino shark in the world (assuming it can't be manufactured) and the price of a one eyed albino sharks is ramped to $70 trillion, then I just took $70 trillion out of the public's pockets.  They are stacking gold and are going to use it to pick your pocket to escape insolvency.  If you don't have physical gold, you are paying the bill for this bail out.  

i.pagnottella's picture

Can't we get gold analysis from someone who isn't biased and in conflict of interest? Gold core I think should be pretty biased.....

Snidley Whipsnae's picture

Try this i.pag...

From I Tulip...

"Essential Trends: Gold in an era of global manetary system regime change"

Gavrikon's picture

Doesn't EVERYBODY have SOME kind of bias?

mayhem_korner's picture



The U.S. economy is like the Minnesota Vikings.  The 1-5 record looks good compared to the Dolphins (Europe).  But for Euro-plosion, the USD would be much lower, and Au would be pushing 2K. 

Soon enough...

scatterbrains's picture

Is it allready an oil standard ? Lets see what the m2 chart looks like with a Brent crude chart overlay and does the increase in oil prices keep the metals in check or at least constrained ?