An amazing prediction: gold at $10,000 by the end of 2012. Frankly, I don’t think this is likely.

The forecaster begins with an assumption: central banks own 80% of the gold, and they are buying.

I think it’s important to keep gold in perspective when we look at gold and how much central banks own vs what is out there in the private sector.  It totals less than 20%.  Yet, clearly, treasury ministries around the world and central banks that control the flow in the stock of global currencies continue to hold gold and are becoming net purchasers of gold.

I am not sure of this. Gold leasing is in fact the sale of gold. It continues. Are we sure that central banks are net purchasers? We need hard data.

So, in a world where we have collapsing sovereign debt, that is denominated in baseless currencies, suddenly gold takes its global sovereignty without regard for any other policymaker because that’s what the marketplace is starting to recognize.

Again, I do not see this. The central banks continue to hold dollars. There is no indication that any other asset is close to the popularity of dollars in central bank portfolios.

The issue that gold, being priced in currency terms, has not appreciated as many current gold holders think it should have already, is understandable.  I think we are going through a period of transition and we have to put up with fits and starts and two steps forward and one step back as we go through this transitional period.

Fair enough. But why is 2012 a sure bet to take two steps forward?

Physical gold is meeting demand. The price of gold is down. Where is this physical gold coming from? The forecaster does not know.

Continue reading →