Wednesday , 22 November 2017


Global Liquidity Supports a Gold Price of $1,780/ozt.

There is a remarkable correlation between the prevailing level of global goldliquidity (defined as the sum of the U.S. monetary base and the foreign holdings of U.S. Treasuries) and the price of gold per troy ounce. The current correlation suggests a gold price of $1,780 as illustrated by the chart below.

So writes Frank Holmes (usfunds.com) in edited excerpts from his original article* entitled How Far is Gold Off Course?.

[The following article is presented by  Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]

Holmes goes on to say in further edited, and in some cases paraphrased, excerpts: Gold has been in extremely oversold territory lately despite drivers for the metal remaining in place. [Below is a chart illustrating]…a different way to look at how far gold has been off course. The chart tracks the correlation of the price of a [troy] ounce of gold to global liquidity. Since June 2000, as the U.S.’s monetary base and foreign holdings increased, so did the price of gold. The correlation suggests the current level of liquidity supports a gold price of $1,780 per ounce, well above the current spot price around $1,300.

current-price-of-gold-diverges click to enlarge

According to Canaccord Genuity, the U.S. economy is “growing at lower than targeted rates,” which means that further quantitative easing will likely be required. In addition, citing a recent White House Office of Management study, Canaccord says that over the next decade, a tremendous $6.6 trillion will be added to the federal debt. “We estimate that the only way to fund the current QE3 program (as well as future government spending) is through the printing of money, therefore further increasing global liquidity,” writes Canaccord. To the research firm, this correlation trend points to “a greater potential for an increase in gold price versus a further decline.” Compounding the extraordinary debt in the U.S. is Europe. Government debt-to-GDP across 17 European countries climbed to 92.2%, hitting “all-time highs in the first quarter of 2013 even after austerity measures were introduced to rebalance the governments’ books,” reported CBS News. Bottom line: government liquidity and debt will likely continue to drive the Fear Trade for gold [which will result in dramatically higher prices over the next few years].

[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]

*http://www.usfunds.com/investor-resources/frank-talk/how-far-is-gold-off-course/#.UfFBy1JzZjo (©2013 U.S. Global Investors, Inc. All Rights Reserved.) Related Articles: 1. Gold: Likely to Fall to $950 – $1100; Unlikely to Rise Above $2,000 – Here’s Why Leave a comment

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One comment

  1. I hope so, at American Gold Refinery, we saw a rush of buyers when gold was headed below 1200 a few weeks back. I wonder if it does in fact hit 1700-1800 again the selling would start up again like last summer.