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Do Charges that Gold is a “Pet Rock That Has Outlived Its Usefulness” Have Any Merit?

A new low has been reached in the ongoing efforts by the mega banksters to strike down gold as a viable safe haven store of value and alternative currency around the globe. One of them recently referred to gold as “A Pet Rock” when talking about forecasts for future gold prices. Needless to say, the cabal of big banks have almost uniformly lowered their forecasts for gold for this year 2016. It is interesting to see what their arguments are for ditching the oldest safe haven hedge in the history of man, and to understand if their challenges to gold bear any merit or are merely more hot air from the large and simply too big to fail organizations with their own axes to grind.

Mainstream Gold Price Predictions for 2016

Other big investment houses hold the very same opinion of gold if they are honest about their true feelings. Some have considered gold to be an old, dead, tired relic of the past for many decades now. Keeping all of this bad blood in mind, it should not come as too big a surprise that the irresponsible, too big to fail banking cabal have mostly called for lower gold prices in 2016. Citibank leads the pack of ravening wolves looking to kick their old arch-enemy gold to the curb. They call for gold prices of $1,050 per ounce by the end of the year, representing a significant decline of over 15% for 2016. UBS Group of Switzerland is actually the most charitable of the major international banks with their end of year forecast of $1,250 per ounce. This is actually slightly higher than the price at which it started 2016. UBS added that they “maintain their core constructive view on gold, expecting gold prices to stabilize and eventually recover. They think that gold has already done a lot to adjust to the present macro environment and anticipate further changes. They expect that any downside from here would be contained ultimately.” This also should not come as too big a surprise from a bank based in one of the last gold-loving holdout countries of the world, Switzerland.

Bank of America does one better than its peers. They claim that the precious metal will decline to $1,000 per ounce in 2016. Their reasoning for this dire prediction of a nearly 20% plunge in the prices is based on “continued hawkish comments from the Fed about falling inflation. This combination of higher nominal opportunity costs and lack of inflation had never been bullish for gold during the prior 40 years.” Yet even though Bank of America/Merrill Lynch forecasts a stunning drop in gold prices this year, they also foresee an even more impressive recovery in gold prices to reach as high as $1,250 per ounce by the conclusion of the fourth quarter in 2016, which would represent a shocking 25% price recovery after the 20% plunge. They similarly have an argument for how this would be possible. “Competitive currency devaluations could ultimately bring about a turning point in gold.” If Bank of America/Merrill Lynch were even partially right on both accounts, it would surely make for an interesting, roller coaster ride of a year in the precious metals complex markets.

Why Do The Major Financial Organizations of the World Consistently Hate Gold So Much?

This long term hatred of the yellow metal by the world’s financial elite goes back to the era of the gold standard. Thanks to first the British Empire and then the United States maintaining a long-term world financial system based on currencies and foreign exchange whose value was fixed to and backed up by set quantities of gold, the ability of the banks and financial companies to manipulate the value and amount of money in the system was severely restricted and limited for several hundreds of years. Then came the sudden shocking abandonment of the gold standard by Richard Nixon back in the early 1970’s. Suddenly banks were free to create practically limitless amounts of fiat currencies whose only value and restrictions now lay in the faith and trust put by the people in the governments who issued them. This meant that money could be multiplied and manipulated as easily as putting a few extra zeros on a page, and then on a computer screen as technology progressed over the last 40 years.

Yet not everyone has given up the memory of gold as the standard bearer of currencies and trade that held for one of the most financially stable international periods of recent history. These people and organizations have clung to the idea that fiat currencies and the malfeasance of the major banks could be once again curtailed by re-hitching the miscreant fiat currencies’ carts to the backing of the gold stallion. This is why the runaway banks and financial elite despise gold and the financial responsibility and limitations that it represents so intensely.

The GFMS Thompson Reuters Gold Prices and Supply Reports

The detailed and comprehensive report on gold prices for the coming year released by GFMS Thompson Reuters tells a different story for future gold prices than do the world banks. Among their various findings are the following important three takeaways:

  1. The total demand for gold bars and coins around the world rose 26% in the in the third quarter in 2015 as compared to the year before period.
  2. Worldwide central banks bought an impressive 132 tones of gold in the third quarter of 2015, which represented 13% more gold than they purchased over the same period in the year prior.
  3. Both China and India continue to be the solid buyers underpinning much of the worldwide gold market all by themselves. For the first nine months in 2015, China purchased 579 tons of gold to India’s 642 tons of the yellow metal standard bearer. Indeed India’s gold bullion imports in August of 2015 alone jumped by a staggering 140%. This amount represented nearly double the July of 2015 gold imports to India.

What all this tells you is that the worldwide demand for bold, both from central banks, China and India, and smaller to larger investors is strong and increasing. Consider that buyers who are not always in the international gold and Central Bank mix entered the marketplace to become net buyers of the yellow store of value this past year. Russia, a few of the other one-time Soviet nations, and Mexico also purchased and grabbed as much gold as they could afford at a new record pace in 2015.

Supplies of Gold Plunge

At the same time, the other side of the demand and supply equation demonstrated that world gold supplies are shrinking quite rapidly, almost at an alarming pace in fact. The quantity of new gold deposit discoveries has crashed and burned. Goldcorp Inc. related how in the early 1990’s, over 125 million new ounces of gold were discovered then. Today the comparable number is considerably lower than 25 million ounces. Besides this evidence of the drop in gold discoveries, there is the support shown in the lower production price to mine gold. At the present time, the prices of gold are nearly equal to the production price for the majority of gold miners. This means that it is no coincidence that the gold mining corporations have massively cut back their budgets for gold exploration at the same time as they have removed from active production the higher expense operating mines. This is severely constraining the amount of new physical gold which is produced every year.

Wesley David

Wesley David is an American published author with decades of experience in financial writing. His areas of expertise include precious metals, commodity investing, economics, international relations, history and more.

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About Wesley David (9 Articles)
Wesley David is an American published author with decades of experience in financial writing. His areas of expertise include precious metals, commodity investing, economics, international relations, history and more.