Jim Rickards: Target <b>Gold Price</b> Between $7,000 And $9,000 per Oz <b>...</b> |
| Jim Rickards: Target <b>Gold Price</b> Between $7,000 And $9,000 per Oz <b>...</b> Posted: 09 Feb 2014 01:06 PM PST We had summarized a while ago 10 Currency War Insights From Jim Rickards and we explained how the World Currency System Is Moving Towards Catastrophe. Our latest articles have focused on how The Ongoing Depression Could Force A Return To The Gold Standard and how the Most Likely Outcome Is Still A Monetary Collapse. Courtesy of The Epoch Times, Jim Rickards gives a first set of insights from his new book which will be out in April 2013. In "The Death of Money, The Coming Collapse of the International Monetary System" (preorder on Amazon), Rickards confirms the predictions made in Currency Wars and goes deeper in the matter by explaing how the international monetary system might collapse and how the new monetary system could look like. About his new book: The sequel is that in "Currency Wars" I also had a lot of history. There were five chapters of history and I thought that was very important. If you are going to talk about gold with the reader, a lot of times if you jump right into gold, people think you are sort of a nut. I find if you tell the story through history people can see gold in a context, and when you talk about it, it doesn't seem quite so strange. In my new book, "The Death of Money," there is no reason to repeat the history—that's all in "Currency Wars"—so it's more forward leaning, and talks more about the future of the international monetary system, a coming collapse. And not just a collapse, because a lot of people are running around talking doom and gloom, the end of the dollar and all that. I might even agree with that, but I don't think it has a lot of content. What I try to do is provide a more in-depth analysis describing what will come next, what the future international monetary system will look like. I point out that the international monetary system has already collapsed three times within the last 100 years—1914, 1939, and 1971—and that another collapse would not be at all unusual. But it's not the end of the world. It's just that the major powers sit down and reform the system. I talk about what that reformation will look like. So that's the sequel or the continuation of the story looking over the horizon. Some stuff that is before "Currency Wars" and some stuff that is after. And other content on the contemporary situation in Europe and China, so I hope people enjoy it. Rickards on gold's prospects: Gold has a number of vectors. It is technically set up for a massive rally. Let me separate the fundamentals from the technicals. Fundamentally my target price for gold is in the range of $7,000 to $9,000 per ounce. That's not something that will happen straight away, but it's not a 10-year forecast either. It's a three- to five-year forecast, for the price to rise by about five to six times. My analysis is based on a collapse of confidence in the dollar and other forms of paper money. To restore confidence you have two means: You either flood the world with liquidity from the International Monetary Fund in the form of Special Drawing Rights [SDRs, a form of money issued by the IMF], or we return to a gold standard. The flooding of the market with SDRs would be highly inflationary, so that by itself would drive gold to a higher level. If they go back to a gold standard they will have to take a non-deflationary price. People say there is not enough gold in the world. The answer is there is always enough gold in the world. It's just a question of the price. Now, at $1,300 an ounce, there is not enough gold to support world trade and finance. But at $10,000 per ounce, there is enough gold. It's not about gold, it's about the price. If you go back to a gold standard you have to avoid the blunder that England made in 1925, by going back to the gold standard at the wrong price, which proved to be highly deflationary, and contributed to the Great Depression. I've done the math on that and the non-deflationary price for a gold standard today is about $9,000 per ounce. The target price is based on supporting the paper money supply with gold. That would be using M1 [paper notes, coins, and checking accounts] as the monetary base, with a 40 percent backing. If you were to use M2 [M1 plus savings accounts and money market funds] with a 100 percent backing, that would be $40,000 per ounce. What it means for gold investors: It wouldn't mean gold would be worth any more [in real terms]; it would just mean the dollar has collapsed. But yes, you get more dollars for the ounce. Let's call that the three- to five-year forecast. For the year ahead, those fundamentals are unlikely to play out in a year. But the technicals can play out. Technically, gold is set up for a major rally based on the decline in floating supply. Whether gold's outlook is linked to gold's crash of 2013: There was 500 tons removed from the GLD [Spider Gold Trust ETF] warehouse by the bullion banks. That was a massive physical overhang removed from the market. People don't really understand how the GLD ETF works. When people are buying the GLD, they are not buying or selling gold; they are buying and selling shares. The gold sits in a warehouse and is only available to authorized participants. If you look at the list of authorized participants and look at the list of bullion banks, they are pretty much the same people: Goldman Sachs, Citigroup, JPMorgan, Morgan Stanley, Deutsche Bank, HSBC, etc. Those banks have the ability to buy up shares, take the shares, cash them in, and get physical gold. And they were doing that and they were sending that gold to Shanghai to support trading and leasing on the Shanghai gold exchange. So when you take 500 tons and dump it on the market, that's about 20 percent of the annual mining supply. It's a massive physical injection. The other factor is just outright manipulation, which is very visible in Comex future prices. I've seen some statistical analysis that demonstrates market manipulation beyond the shadow of a doubt. So the point is that between central bank manipulation through Comex futures and bullion banks dumping the physical, and by cleaning out the GLD warehouse, and also the Comex warehouse for that matter, there is a massive amount of gold that came on the market over and above normal supply trends, putting massive selling pressure on the Comex. So that was a bad combination, but the problem is that it's not sustainable. Where physical gold is going: You can't loot the warehouse twice. Once you take all the gold out, you can't take it out again. JPMorgan's vault is low, Comex's vault is low, the GLD's vault is low. One of the big movements right now is gold moving from places like UBS, Credit Suisse, and Deutsche Bank to private storage such as G4S, ViaMAT, and Brink's. That doesn't increase the supply of gold at all. But what it does do is it decreases the floating supply available for trading. If I have my gold at UBS, UBS typically has the right of rehypothecation. But if I take my gold and move it over to ViaMAT, it's just sitting there and it's not being traded or rehypothecated. So, if I move gold from UBS to ViaMAT, there's no more or less gold in the world. I'm still the owner, and it's the same amount of gold. But from a market perspective, the floating supply has decreased. The biggest player in that is China. China is buying thousands of tons of gold secretly through deception and using military intelligence assets, covert operations, etcetera. Whether gold will rally: There is a total supply of gold in the world. But to corner a market or squeeze a market, you don't need to buy all the gold, you just need to buy the floating supply. Think of all the gold in the world, it's about 170,000 tons. Think of a little sliver on top of it that is the floating supply available for trading. Gold that's in the Comex or JPMorgan or GLD vaults is available for trading. Gold purchased by the Chinese will not see the light of day again for the next 300 years, and is not available for trading. So with the gold going from West to East, and from GLD to China, the total amount of gold is unchanged, but the floating supply is declining rapidly. This means that the paper gold that sits on top of the floating supply is becoming more and more unstable and vulnerable to a short squeeze, because there is not enough physical gold to support it. So that's likely to collapse at one point and lead to a short squeeze and heavy buying.  |
| <b>Gold Price</b> Likely to Break Above Downtrend Line this Week Posted: 05 Feb 2014 04:33 PM PST Gold Price Close Today : 1257.30 Change : 5.60 or 0.45% Silver Price Close Today : 19.785 Gold Silver Ratio Today : 63.548 Silver Gold Ratio Today : 0.01574 Platinum Price Close Today : 1377.70 Palladium Price Close Today : 706.90 S&P 500 : 1,751.64 Dow In GOLD$ : $253.86 Dow in GOLD oz : 12.280 Dow in SILVER oz : 780.40 Dow Industrial : 15,440.23 US Dollar Index : 81.130 Lookie, lookie! The GOLD PRICE rose $5.60 (0.4%) to close Comex at $1,257.30. Silver vaulted 2%, 38.3 cents, to 1978.5c. Wow. Friends, the gold price today punched clean through that downtrend line from April, poked its head up to $1,274.50, but couldn't hang on there. Closed at $1,257.30, just beneath that downtrend line. However, it has traded out into an even sided triangle and is pushing to break out to the upside. My fastidious mind prevents me from speculating that while the stock market is sinking like an anvil flung out of a C140 cargo plane and the Nice Government Men, whose self-anointed duty has now become to keep stocks rising forever, are struggling to keep stocks floating, the NGM also have a substantial interest in keeping down gold. Whew. That was one whale of a sentence. The GOLD PRICE is pawing the ground, trying to jump that fence. It's likely to succeed this week. The SILVER PRICE breakout through its short term (since January) downtrend line was even more dramatic, and carried it above both the 50 and the 20 day moving averages (1979 cents and 1976c). However, although it reached 2033c at its high, it didn't stay there, and it didn't close above 2050c. Ain't no point in talking much till it does, although I confess I bought some back yonder near the lows, and a little more since then. Every day makes it more believable that 31 December marked a double bottom with June AND the last low for the 2011-2013 correction. It's a vexing project to try to compare prices over time, but the conclusion I have to draw is that both silver and gold are hugely undervalued against their historical values. I theorize that the entire money supply -- gold, silver, and money substitutes such as the US dollar -- has been so inflated worldwide by money substitutes, that it has taken all prices higher and severely undervalued silver and gold. Here's an example from a recent National Geographic. While building the dome on the Cathedral in Florence, Italy, 1420-1436, the city paid the architect, Filippo Brunelleschi, thirty- six gold florins a year, later increased to one hundred. What's a florin? A gold coin -- "ducat" -- first minted in Italy about 1150 a.d. containing 0.1109 troy ounce of gold (3.5 grams 99-2/3% pure). The denomination was adopted in Venice as the ducat or zecchino ("sequin") and in Florence as the "florin," and in Germany, Hungary, and the Netherlands. What was it worth? Thirty-six ducats equals 3.9924 troy ounces fine gold. At $1,250 an ounce, Florence was paying Brunelleschi about $4,990.50 yearly. See what I mean? Just doesn't sound like much to pay the man designing and building your republic's greatest monument. What about his raise to 100 ducats a year? That boosted his pay to 11.09 oz, or, at $1,250 an ounce, $13,862.50/year. Three conclusions remain: (1) the pathbreaking genius architect Brunelleschi was stupid, (2) worked cheap, or (3) gold is tremendously undervalued today. Now, today's market: Stocks tried to rally today but wilted. Dow fell as far as it climbed yesterday and touched the 200 DMA (15,478.57), where it fainted. Closed lower by 5.01 (0.03%) at 15440.23. S&P500 behaved much the same, but is above its 200 DMA (1,709.39). S&P500 gave back 3.56 points (0.2%) to 1,751.64. Somewhere here will come a little corrective wave up. Not much question this downward leg is aligned with the market's major direction (is impulsive) and not merely corrective. That implies that direction has changed and that we've seen the top, but wait for a final verdict. Dow in gold today fell 0.26% to 12.28 oz (G$253.85 gold dollars) while the Dow in silver really tumbled, 15.6 oz or 1.97%, to 776.87 oz. (Oddly enough, just about a thousand silver dollars, well, $1,004.49 silver dollars in fact). US Dollar Index acts like a teenage girl at a dance, turning first one way and then another. Do you want to dance, or not? Dollar fell again today, 11 basis points (0.13%) to 81.13. Last four days have established a small downtrend. Has now failed twice to pierce its 200 DMA. Not promising. Euro has risen enough to fill the gap behind four days ago when it fell. Rose 0.14% to $1.3534. Gravity now controlling its trajectory. Yen rose 0.14% to 98.53 and is closing in on its 200 DMA (100.09). Wants to rally further. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger © 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. |
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