After past week’s report from the Official Monetary and Financial Institutions Forum in which they lay out arguments for an official role of gold in the current monetary system (a form of a gold standard), it is now a blog post from Ambrose Evans-Pritchard on The Telegraph that grabs the attention within the gold community. The author started his latest blog post A new Gold Standard is being born by saying that “The world is moving step by step towards a de facto Gold Standard, without any meetings of G20 leaders to announce the idea or bless the project.” One thing is for sure, looking at the number of comments and shares, it seems that the topic is becoming hot. Even legendary Jim Sinclair reacted publicly to the blog post.
The key facts to underpin his point are the following:
- Central banks have added a net 536 tonnes of gold in 2012. They did so to diversify their away from the fiat currencies (paper based currencies) they are holding. The following table could help in putting things in perspective (courtesy BullionVault):
- There is no future for both the euro and the dollar as a world reserve currency, each one for obvious but different reasons (the European divide vs the American global debt king).
- China is buying gold at an enormous pace. They are committed to raise their gold reserves, just like Russia.
- The Bundesbank started this week to bring home their gold held abroad, although it will take 7 years to repatriate only part of the gold reserves
Now interestingly, the author points to a quote from Jim Sinclair, a legend in the gold business, and admits he doesn’t really see how “the Bundesbank’s action will prove the death knell of dollar power”.
In a reaction on the article, Jim Sinclair e-mailed his subscribers the following:
I have been outlining this evolution [return to a gold standard] to you for more than a decade. This article touches on it, but does not outline it. This article smells it but does not yet fully appreciate it. This process is behind the ascendancy of the euro despite every bear argument to the settlement currency of choice.
This is happening in the marketplace, and not behind closed doors in smoke filled rooms. Yes, there are closed doors involved in it, but they are free market proponents. I know more about this than even the people who have already adopted a name for it.
Gold is going to and beyond $3500 based entirely on this initiative certain to become completed as a reality. It is already happening right in front of your eyes, but the world is still blind to it.
This is why gold will rise to $3500 and beyond, but never do a 1980 fall again.
This is why silver is a great trading vehicle, but not a great long term holding.
This is why I have invested $32,000,000 in my own approach towards gold.
This is why I sold ALL of my personal material treasures to make this investment when only I would do it.
This is why I took on large debt to accomplish my plan.
This was the basis for my career interview by Forbes in Dec 2000.
No government fund, no gold bank, and no long cycle analyst can stop the progression of gold. The capitalization of the forces behind gold will overcome all these other bearish considerations. I say this because I know this, not because I think this.
I knew gold’s first most important number was $1650 11 years ahead of time. I did not think it. I am telling you now because I know it that gold will go to and beyond $3500. It will be gold that saves a financially collapsing world of debt.