Wednesday , 9 July 2014

$10,000 Gold Debunked

$10,000 (U.S.) gold [is] a gold bug’s dream come true [but] investors would be wise to have far have more modest expectations. [Let me explain why.] Words: 1000

So says Rudy Luukko (www.morningstar.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Luukko goes on to say, in part:

[While] ten grand a [troy] ounce is an astronomical price for gold and would be more six times higher than bullion was fetching this week it does make for a catchy book title and marketing campaign. [That is just what] Toronto-based Bullion Management Group Inc. [BMG] and its president and CEO Nick Barisheff…[was doing when he] presented his unabashedly bullish case for bullion to an affluent audience of about 400 at an Empire Club event in Toronto [recently. See his speech here. After all,] what’s good for gold is good for BMG and its chief bullion booster.

Since the launch of its first bullion fund in 2002, BMG has grown to $540 million in assets under management. Along with its mutual fund flagship, the $369-million BMG BullionFund which holds equal amounts of gold, silver and platinum, BMG also offers the $126-million BMG Gold BullionFund, and its BullionBars program that enables investors to make direct purchases of bullion.

Later this year, Barisheff plans to publish a book entitled $10,000 Gold: The Inevitable Rise and Investors’ Safe Haven. His thesis is that amid rising government debt and weakening currencies, gold bullion will soar to stratospheric heights.

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Barisheff puts forward a scary scenario of hyperinflation. Governments, he says, are debasing their currencies by cranking up the printing presses to cope with slowing growth and spiralling debt. “This is exactly what we’re seeing today,” he said. “Gold can rise as high as currencies can fall.” [ Most of the "Related Articles" hyperlinked below fully support that contention.]

Gold’s glittering performance over the past decade has enhanced its allure, attracting new investors and speculators alike during a period when stock markets have been disappointing. In the 10 years ended Dec. 31, gold has had a compound annual return of 19 per cent in U.S. dollars.

BMG’s aggressive time frame for predicting $10,000 gold strains credibility. “Nick says if the economic conditions with regard to currency creation continue as they have, then we could see $10,000 gold within approximately five years [that is, by 2016 latest],” Robert Para, BMG’s vice-president of marketing, told me. [He is not alone.  Other analysts also see gold going to $10,000 - or higher - as well of which  8 see such happening within the next year or two

Since gold now fetches about $1,650, a surge to $10,000 over five years would represent an eye-popping annualized return of about 44%. To put that number in perspective, if crude oil rose at the same rate, we’d be paying $7.50 a litre at the gas pumps five years from now.

Even if one accepted the scenario of an inflationary Armageddon, diversification would still be prudent. Sure, gold serves as an inflation hedge, but so would a fund providing exposure to a wide range of commodities and hard assets, including precious metals.

Looking back at the past decade, Canadian investors should also put gold’s gains in perspective. Since bullion is customarily priced in U.S. currency, the returns of the past 10 years don’t look as good [for non-U.S. residents or other countries who have their national currencies tied to that of the US dollar. [For example,] when expressed in Canadian dollars, gold bullion has a 10-year compound annual return of ["only" 14%]…

None of [the above] debunks the notion that gold, when held as part of a diversified portfolio, has investment merit [and, while] gold pays no income, in this low-rate environment there’s less income to be sacrificed by holding gold bullion, or gold coins, or bullion funds. Even so, investors would be wise to have far have more modest expectations for gold. [After all,] bullion prices can also experience sharp losses as we’ve seen recently with gold [currently down approximately 15%] from its record high in early September.

*http://www.thestar.com/business/article/1115050–gold-returns-not-all-they-appear-to-be

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This is not a typical bull market. Gold is not rising in value, but instead, currencies are losing purchasing power against gold and, therefore, gold can rise as high as currencies can fall. Since currencies are falling because of increasing debt, gold can rise as high as government debt can grow. Based on official estimates, America’s debt is projected to reach $23 trillion in 2015 and, if its correlation with the price of gold remains the same, the indicated gold price would be $2,600 per ounce. However, if history is any example, it’s a safe bet that government expenditure estimates will be greatly exceeded, and [this] rising debt will cause the price of gold to rise to $10,000…over the next five years. (Let me explain further.] Words: 1767.

2. Buy Gold NOW Ahead of Further QE – Here’s Why

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Due to high unemployment and a weak recovery world central bankers are focused on weakening their currencies to boost exports. [As such,] I think [even more] quantitative easing and other currency intervention is in our future…[and this will further increase]…both inflation and the price of gold. Let me explain with a few charts.] Words: 350

3. These 5 Apocalyptic Engines Causing Hyperbolic Growth in US Money Supply

I recently wrote an article showing how US True Money Supply (TMS) appeared to be growing at a hyperbolic rate [see here], and that gold was also on a hyperbolic course…Hyperbolic growth in the quantity of money ends with hyperinflation… [and] both TMS and the dollar price of gold are pointing to a hyperinflationary outcome. This article explains why this might be so. Words: 764

4. True Money Supply Is Already Hyperinflationary! What’s Next?

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Economists are telling central banks to accelerate monetary growth even faster…to avoid a bank balance sheet implosion with all the deflationary consequences that implies. [As such,] the prospects for 2012, and thereafter, are for Total Money Supply to continue its hyperbolic trend – and when such a trend becomes established it becomes almost impossible to stop because the whole debt-based economy and the banking system would collapse. [Let me explain further.] Words: 550

5. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

inflation

Evidence shows that the U.S. money supply trend is in the early stages of hyperbolic growth coupled with a similar move in the price of gold. All sign point to a further escalation of money-printing in 2012…followed by unexpected and accelerating price inflation, followed by a rise in nominal interest rates that will bring a sovereign debt crisis for the U. S. dollar with it as the cost of borrowing for the government escalates…[Let me show you the evidence.] Words: 660

6. Economic/Currency Collapse Could Bring Martial Law and Confiscation of Your High-priced Gold! Got Silver?

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Do we really honest-to-God no-fingers-crossed cherry-on-top believe that the powers-that-be will simply allow us to mosey up to the cashiers cage and redeem or convert our Gold for whatever monetary unit reigns supreme or is created [should our current financial system and currencies collapse? As such,] IF there comes a time when the best move forward is to sell most of our Gold and switch to another asset class, one more likely to survive the transition intact, will we be able to see this as obvious and a no brainer? [Let me explain what could well happen and the effect such a development would have on all things Gold.] Words: 3037

7. What is Money – Really – and Why Do We Need to Own Gold – Really?

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Have you ever wondered what money really is [and why we need to own some gold as a result]? You’ll notice that everyone you read has a strong opinion , but who’s right? [Let look at the situation and see if we can come to an answer that we both can agree on.] Words: 3086

8. Egon von Greyerz Interview on Future QE, Hyperinflation and the Price of Gold

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A final or total catastrophe of the currency system will occur as a result of unlimited money printing that will lead to hyperinflation. Stock markets will benefit temporarily from this QE [but we expect that the] markets will fall 90% against gold in the next few years. The correction in the precious metals [will] likely [soon] be over and we should see the metals going to new highs in 2012. Words: 450

9. Continuing High Unemployment = More Money Printing = Higher Gold & Silver Prices

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The Federal Reserve has a dual mandate set by Congress of maximum employment and stable prices. During Chairman Bernanke’s most recent press conference he indicated that the Federal Reserve has done a better job of maintaining price stability while falling short of fostering maximum employment. [As such,] we believe the Federal Reserve will continue to increase the monetary base and weaken the dollar as long as unemployment remains elevated. While the economy (measured by real GDP) and the unemployment rate have not benefited from a substantial increase in the monetary base, the price of gold and silver have benefited from money printing. We believe this statement is quite important for monetary policy and for investors. [Let us explain further.] Words: 388

10. Where Is This Unprecedented Global Financial Crisis Headed? A Retrospective from Alf Field

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Everyone must be wondering where this “unprecedented global financial crisis”, (the World Bank’s words), is heading. What follows, for what they are worth, are my cogitations on this crisis. Words: 1641
 
11. Continuing High Unemployment = More Money Printing = Higher Gold & Silver Prices

data-190x190

The Federal Reserve has a dual mandate set by Congress of maximum employment and stable prices. During Chairman Bernanke’s most recent press conference he indicated that the Federal Reserve has done a better job of maintaining price stability while falling short of fostering maximum employment. [As such,] we believe the Federal Reserve will continue to increase the monetary base and weaken the dollar as long as unemployment remains elevated. While the economy (measured by real GDP) and the unemployment rate have not benefited from a substantial increase in the monetary base, the price of gold and silver have benefited from money printing. We believe this statement is quite important for monetary policy and for investors. [Let us explain further.] Words: 388

12. Why Negative Real Interest Rates + Stimulative Money Supply = $10,000/ozt. GoldGold-Bullion-Ingots

 
 
 
Question: What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks? Answer: An exceptionally potent formula for higher gold prices that could send gold to the unimaginable level of $10,000 an ounce. [Let me explain further.] Words: 1049
 
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Back in 2009 I began keeping track of those financial analysts, economists, academics and commentators who were of the opinion that it was just a matter of time before gold reached a parabolic peak price well in excess of the prevailing price. As time passed the list grew dramatically and at last count numbered 140 such individuals who have gone on record as saying that gold will go to at least $3,000 – and as high as $20,000 – before the gold bubble finally pops. Of more immediate interest, however, is that 8 of those individuals believe gold will reach its parabolic peak price in the next 12 months – even as early as February, 2012. This article identifies those 8 and outlines their rationale for reaching their individual price expectations. Words: 1450

14. Gold Bounce Confirms Bull Market Intact on Its Way to $3,000 – $10,000

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With what is happening in the price of gold these past few weeks/months it is imperative to take a look at the big picture and in doing so it shows that we are still very much in a long-term bull market. Let’s take a look at some charts that clearly outline where we are currently and where we could well be going. Words: 925

15. Goldrunner: Gold Now on Its Way to $3,000+ By mid-2012

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Our work with Gold is based on a “Model” off the late 70’s Gold Bull that has been replicating nicely since we started the Fractal Work with Gold back in 2002 and 2003. Short-term volatile moves in Gold, as we have seen over the past weeks, do not affect our projections based on the model, leaving the expectation of a move in Gold up to $3,000 into mid-year intact as outlined in our previous article entitled Gold Tsunami: on the Cusp of $3000+? Words: 996

16. Alf Field: Gold Going to $4,500/ozt. in Next Wave Towards Parabolic Peak

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Once this present correction in gold has been completed it should [undergo] the largest and strongest wave in the entire gold bull market…to around $4,500 with only two 13% corrections along the way. [Let me explain how I came to that conclusion.] Words: 1900

17. Gold: Will it Go to $12,500 – $24,000 – or $39,000/ozt. – by End of Decade? Here’s the Rationale for Each

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From questions whether gold is in a bubble to predictions that soaring prices are just around the corner, one thing is clear: a new phase of awareness for gold is upon us. How far might it move before these troubling times are over? [Let's take a close look at a variety of factors and scenarios before coming to a conclusion.] Words: 5717

18. Gold Will Reach $3,000/$4,000/$5,000 Before This Bull Market Is Over! Here are 12 Factors Why

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I believe that the price of gold will… reach… $3,000, $4,000, and even $5,000 [per troy] ounce…during the course of this long-lasting bull market, a bull market that still has years of life left to it…[although] prices will remain extremely volatile – with big swings both up and down along a rising trend…The future price of gold is a function of past and prospective world economic, demographic, and political developments [and in this article] I review some of these developments and trends – so that you can come to your own “golden” conclusions. Words: 3800

19. New Analysis Suggests a Parabolic Rise in Price of Gold to $4,380/ozt.

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According to my 2000 calculations, if interest rates and inflation stay constant over the next 2 years, we could expect to see (with 95.2% certainty) a parabolic peak price for gold of $4,380 per troy ounce by then! Let me explain what assumptions I made and the methods I undertook to arrive at that number and you can decide just how realistic it is. Words: 740

20. $10,000 Gold is Coming in 2012/13! Here’s Why

gold-bars4

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 contribute to rampant price inflation and drive precious metals bullion and mining stock to a parabolic peak price of $10,000 sometime in 2012 or 2013 at the [...]

21. Is Gold On Its Way to $3,000, $5,000, $10,000 or Even Higher? These Analysts Think So

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140 analysts maintain that gold will eventually reach a parabolic peak price of at least $3,000/ozt. before the bubble bursts of which 100 see gold reaching at least $5,000/ozt., 17 predict a parabolic peak price of as much as $10,000 per troy ounce of which 12 are on record as saying gold could go even higher than that. Take a look here at who is projecting what, by when and why. Words: 676