Wednesday, July 21, 2010

The Numbers Just Keep Going Up

There have been forecasts of $3,000 gold, $5,000 gold and even $10,000+ gold based upon various valuation frameworks. From what I've seen, the most popular level is around $5,000 with $3,000 running second. Now, someone associated with GATA has come up with the figure of...$52,831. It isn't a real forecast, as it's contingent upon the U.S. returning to a full gold standard, but it can serve as the base of one. As explained in a Mineweb article:
In a rather convoluted article on the real value of gold GATA's Adrian Douglas, writing in www.marketforceanalysis.com has calculated that in terms of U.S. dollar convertibility, the real price of gold now stands at $52,381 an ounce!

In producing this figure Douglas goes back to President Nixon's ‘temporary' removal of the convertibility of the dollar for gold in 1971, when the U.S. money supply was valued at $35 an ounce, to the current money supply/price situation.

Today, Douglas avers, with $13.789 trillion in circulation and a gold price of around $1200 an ounce, if one wanted to return to a gold-backed dollar, the U.S. government would need to hold 11.5 billion ounces - it actually admits to only having 261.5 million ounces (although some believe it may in reality hold even less). Thus in terms of simple mathematics the gold price - to make the dollar convertible again, would have to be the aforesaid $52,381. And, with the U.S. money supply growing by the day this figure should probably actually be even higher already....

I can't help thinking that someone, somewhere is going to come up with a perhaps hypothetical framework that backs up a valuation of $100,000 gold or more. Six figures awaits...

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