Posted on 06/13/2010 2:00:01 PM PDT by blam
Gold Going to Parabolic Top of $10,000 by 2012 For Good Reasons
Commodities / Gold and Silver 2010
Jun 13, 2010 - 03:05 PM
By: Lorimer Wilson
No wishful thinking here! As I see it gold is going to a parabolic top of $10,000 by 2012 for very good reasons - sovereign debt defaults, bankruptcies of “too big to fail” banks and other financial entities, currency inflation and devaluations - which will all contribute to rampant price inflation.
Not surprisingly, I have company in that view:
Money manager, Peter Schiff, told Business Week recently that, "Gold could reach $5,000 to $10,000 per ounce in the next 5 to 10 years” and highly respected economist David Rosenberg is of the opinion that "There is no doubt that gold can easily double from here."
THE CAUSES
1. History is No Guide
Gold has only been trading freely since President Nixon's 1971 decision to deny gold to the French and others attempting to repatriate their paper dollars for the metal. As such, there has been a scant forty years of gold production and trading since it was detached from supporting paper money. This period has also been marked by substantially higher monetary and price inflation as well as currency devaluation.
2. Market Manipulation
The Commodity Futures Trading Commission (CFTC) recently held a major hearing which blew the doors off bullion metals futures trading markets in terms of what was revealed publically. I predict this public hearing will be viewed in the period ahead as the precious metals price liberation event of the decade.
It is commonly known that JP Morgan Chase in the major player in commodities futures markets trading. Not only do they take massive naked short positions (betting that prices will fall), they do it with large substantial leverage. What isn't as well known though is that Chase acts as the agent for the Federal Reserve Board and other central banks in 'managing' the markets on their behalf. Central banks want 'orderly' precious metals markets and prices and currencies which don't gyrate wildly. Only then can they achieve stealth inflation in their monetary policy which is so beneficial in servicing debt. It also makes for good (meaning effective) politics.
3. Insufficient Physical Inventories
While it is normal for traders to roll their expiring contracts over into new paper trades, some traders accept cash in settlement rather than the metal. To the amazement of everyone the recent hearing of the CFTC - specifically Jeff Christensen’s comments - inadvertently confirmed that there is little bullion in storage at the London Metals Exchange or New York's COMEX to back the metals trading. He justified this fact by noting that only one ounce of one hundred traded is paid out in physical metal. This revelation confirmed a much worse reality than even critics, such as the Gold Anti-Trust Action Committee (GATA), had expected. It seems that the Asian and Mid East buyers and owners of bullion have been removing gold from their dealers’ vaults and are taking it "home" thus leaving much less than previously thought in the London, New York and Toronto vaults.
In addition to what looks like a production peak in the gold mining industry (production has fallen in 5 of the last 8 years), central banks have for the first time recently become net purchasers (having bought more gold last year – 425 tons – than at any time since 1964).
The single largest purchasers of metal these days, other than central banks, are the bullion ETF's (Exchange Traded Funds) which ostensibly have their metal inventories in vaults. These relatively new investment vehicles, unfortunately, are not transparent in their business practices. Regular audits by reputable accounting firms and allocated and segregated bullion inventories stored in reputable vaults are opaque at best. This begs the question: “Do the large ETF bullion funds actually have the metal they purport to own, or is their inventory more the 'paper gold' variety in which bullion trading exchanges seem to specialize?”
THE EFFECT
1.The revelation, outlined above, that there is insufficient physical inventory to meet new investment demand for ownership and delivery of physical bullion, is about to blow the price lid skyward.
2.As public awareness of sovereign debt mounts, it will drive home the reality of mounting government insolvency.
3.Confidence in currencies will wilt commensurately.
4.Investment demand for real gold and real money as a safe haven investment will expand exponentially.
5.These events should take place from mid 2011 through 2012 and extend further out toward 2015 before demand is satiated.
6.The dramatic price increases in gold and silver will at that point also satisfy the unstated desire of central banks and politicians to devalue their currencies in order to assist them in meeting their debt and unfunded liabilities.
After the 2008/2009 crash, governments bailed out their failing financial institutions and investment banks through a variety of innovative measures. The next time round most governments will not be in a position to do so – again. Even more troubling, the IMF (International Monetary Fund) will not be capable of rescuing the increasing number of insolvent governments and their financial institutions.
Conclusion
You may think my aforementioned views are crazy or perhaps just that my imagination is way out of hand or, at best, that I don’t have access to the appropriate reality checks. Be that as it may, I am increasingly confident that the consequences of fragile sovereign debt, precious metals market manipulation, insufficient physical supply, and the need for a safe haven investment refuge, will drive precious metals bullion and mining stock to unimagined heights.
The circumstances immediately ahead are largely unprecedented. History is therefore only marginally useful as our guide to the future price of precious metals. We are now in genuinely unchartered territory.
Get yourself positioned to take advantage of this event of a lifetime. Protect your assets from the next and more serious leg of the 'Greater Depression' directly ahead. Get a running start NOW on growing your future wealth.
I hereby prognosticate a gazillion zloty.
If gold is in such short supply and set to climb so fast, then I would expect gold substitutes to climb in value also:
silver
platinum
paladium and the other platinum group metals
diamond and other gemstones that have industrial uses.
industrial semi precious metals such as copper, nickle, zinc, etc
The fact that the above havn’t been climbing in value nearly as fast as gold is suspicious to me.
We can look at it another way and instead of making a list of things that should climb in price like gold, make a list of things that will decline in value relative to gold.
fiat currency
textiles
construction materials/lumber/paper
labor
fuel/energy
food/ag products
petroleum based products
pharmaceuticals
I think I listed the above in descending order based on how fast the value will drop compared to gold.
machinery and electronics should go up in value since they contain metals and are created by machines that themselves contain metals. The new age of batteries should accelerate this surge since high tech batteries contain rare metals. when combined with a declining value of currency, the prices of machinery/electronics(priced in dollars) should be runaway insane, right?
But I don’t see any surge in machinery/electronics prices. So what is going on? Where is my thinking flawed?
And gold simply has... Desire. Nothing really behind it other than people desire it. Much like tulips in Holland 400 years ago, and paper money today.
Gold is just another fiat currency; I’m not saying it’s not a good investment now (hey, I make money auto-trading currency movements between the HKD, USD, and EUR) but as far as a valuable metal it’s well behind many others, specifically silver which I believe is very undervalued (probably looking at a doubling over the next 2-3 years as silver mine output is slowing).
retarded oracle?
barring nuclear armageddon, there will always be a market for gold and; thus, it will always be a tradable commodity. Plus, it’s much easier to carry around a few 1 oz coins than a few cases of whiskey or cans of ammo. I don’t think it will necessarily hit $10,000 oz in the next 10 years but I don’t see it drastically dropping in price any time soon either.
The one time I dont have any money at all to be in the markets.
declining silver mine output supports a declining industrial demand theory; however, I own both silver and gold and I wouldn’t discourage anyone from buying either. At the same time, I wouldn’t encourage the average joe to get into metals looking for short term profits. I might encourage someone to invest 25% of their overall investment portfolio in physical metals simply as an insurance fund. Anything more than that and you’re speculating IMO. What do I know though, I make my money pushing drugs and wiping butts.
Exactly. A hundred pounds of copper or lead, or a few pounds of silver will still be VERY valuable in any situation because of the wide variety of uses (heck, a copper ring on the ground will keep slugs and snails away from your vegetables); gold really has very limited uses outside of pretty baubles.
Silver, copper, and lead are more volatile than gold, but that's more a reflection of the actual market, which indicates their actual REAL-WORLD use and hence real value. Gold is often stable when other markets aren't, or it's highly volatile when everything else is good. It's disconnected from the markets because there really isn't a need or use for gold outside the markets. It's a psychological blanket for many right now, but long-term we see gold doing worse than most other industrial metals or even the markets.
Consider that gold is still around half it's 1980 peak (when you correct for inflation); the DJIA - even today - is around 4 times higher than in 1980.
Personally, I have a good amount of silver, a lot of copper in various locations, and am upping my physical inventory of lead (for investment and fun purposes - I do have a gunpowder addiction to feed!). Gold is interesting, but for it to go to $10K? Only if the dollar collapses by a factor of 10, and that would be a TEOTWAWKI situation.
“retarded oracle”...isn’t THAT the soon to be dumped by his spouse Oracle GORE?
I’ve read recently several different articles that all suggest the fair price of gold is the cost to mine it. After that, it’s all speculation.
The current cost to mine gold is about $450 per oz.
I also remember well when oil was risiing and it hit the amazing hi in the $140+ per barrel, how Goldman Sachs came out and said it was going to $200 per barrel.
The very next day oil started dropping and it didn’t stop until it hit below $30/barrel.
I think that’s called “Pump & Dump”.
Problem is, if TEOTWAWKI takes place, the whole system that puts value on gold also goes away. In such a case, I can see a case of whiskey and a jerrycan of .45 ACP getting you a lot further than the equivalent amount of gold by pre-collapse value.
Well, the Bible says that the time is coming when those who hoard and keep gold and silver will find it to be worthless. It's talking about the end of the last days, just before Jesus, the Messiah of Israel comes to set up His one-world government over all the nations of the world.
Those who are holding onto silver and gold will find that they've become worthless in their hands.
James Chapter 5 1 Come now, you rich, weep and howl for your miseries that are coming upon you! 2 Your riches are corrupted, and your garments are moth-eaten. 3 Your gold and silver are corroded, and their corrosion will be a witness against you and will eat your flesh like fire. You have heaped up treasure in the last days. 4 Indeed the wages of the laborers who mowed your fields, which you kept back by fraud, cry out; and the cries of the reapers have reached the ears of the Lord of Sabaoth. 5 You have lived on the earth in pleasure and luxury; you have fattened your hearts as in a day of slaughter. 6 You have condemned, you have murdered the just; he does not resist you. 7 Therefore be patient, brethren, until the coming of the Lord. See how the farmer waits for the precious fruit of the earth, waiting patiently for it until it receives the early and latter rain. 8 You also be patient. Establish your hearts, for the coming of the Lord is at hand.
The New King James version says the gold and silver has become corrupted. The King James version says cankered ... the original word means to become rust covered -- it's not talking literally, but figurately, and thus made useless.
Gold and Silver will be of no use and value at that time of the coming of the Lord. It will have lost all its false value that people perceive in it now -- and it is only a "perception" and nothing more.
Simply that everything you listed is an industrial commodity and industry is still in overcapacity. OTOH, gold is only money, so must be traded for one of the commodities you listed to be put to use in production. But nobody wants to do that right now, so gold is being held and everything is not.
Then gold could be reflecting the fact that the cost to mine is about to rise substantially. In the chart in post 20, there is evidence of short term pump and dump (e.g. early 2008) and long term strength. I buy for the long term although I will get out on a pump and dump high to buy some essentials, but you will be a person buying at that point.
Care to review the graph of real estate during the period 1950 - 2006? Can’t possibly tank? Hmmm.
A better, more accurate word would seem to asymptotic.
A parabola can be somewhat flat.
If you doubt that inflation has hit our country, just try buying groceries for a few weeks.Every item in the grocery stores is going up. Also there has never been a time in history in which
gold has been worth nothing, you cannot say that about paper money.ie The Republic.
Gold is used in electronics.
Sshhhh, they’ll run that word into the ground, too.
The word “cankered” is still in use, in the KJV sense, in this part of the south. Meat gone bad is described as cankered. It means variously rotted, spoiled, disfigured or pocked with sores, among the usages I’ve heard over almost a lifetime lived here. I believe canker and cancer have the same root.
Very easy. One or more of the PIIGS countries will go into default. The EU will fragment and the Euro collapse. China will refuse to accept any more dollars in payment for exports. Lots of things to be fearful about.
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