The Case for a Coming Mania in GOLD

THE CASE FOR A COMING MANIA IN GOLD Fiat money systems are breaking down. In previous such episodes, the result has been a significant increase in the price of gold. Consider the evidence: Demand for gold is rising because.. 1. BANK FAILURES More banks and brokereage houses are failing, showing the existing system is breaking down. This causes demand for alternate stores of wealth, like gold, to rise. Bank Failures in the US 2. NEGATIVE REAL INTEREST RATES Savings earn no interest, but prices are still rising -- so purchasing power is declining. Demand for reliable stores of wealth grows. 446 Real Interest Rates Interbank rate less YoY growth rate in CPI as of March 2012 -3% -2.9% -2.5% -9% -4% 11 UK EU USA Canada China 2003-2007 2008-2012 3. UNSUSTAINABLE DEBT The higher debt goes as a percentage of GDP, the more likely 4. CENTRAL BANKS ARE will need to be printed to pay the debt -- which could money turn to a crisis of confidence in the currency and a flight to forms of money that cannot be printed. BÜYING Are they preparing to re-introduce gold into the monetary system? Debt as a Percentage of GDP Q1 2012* 208% Aggregate Central Bank Gold Accumulation CASEY RESEARCH Thousand Tonnes 165% 31.4 31.2 31.0 120% 30.8 30.6 80% 69% 30.4 30.2 44% 30.0 29.8 China Q4 2008 Q1 Q2 03 Q4 Q2 аз Q4 2010 2010 Q1 Q2 2011 Q4 Japan Greece Italy UK US 2009 2009 2009 2009 2010 2010 2011 2011 2011 2012 O Cosey Research 2012 Source: World Gold Council *Excludes intragovernmental holdings And supply cannot match demand's growth because... 4. THERE'S NOT MUCH GOLD LEFT In spite of rising gold prices, discoveries are declining. 5. IT'S A SMALL MARKET Forecasted Gold Production (in thousands of tons) If just 1% of the physical US dollars were used to buy gold Eagles, it would be 13X more than the entire value of all coins purchased in 2011. 2,750 2,710 2,710 2,675 2,650 2,605 1% of M1 Money Supply 2,470 2,430 2010 2011 2012 2013 2014 2015 2016 2017 All gold coins purchased in the US in 2011 6. IT'S A REALLY SMALL MARKET US M1 Money Supply Current value of exchange-traded gold products is 2.1% of the current assets held by S&P 500 corporations. What if big corporations diversify into gold? Value of ALL 7. SERIOUSLY, IT'S A REALLY SMALL MARKET exchange-traded gold instruments The TSX Venture Exchange is where most startup gold exploration stocks are listed. Apple is the single most value company in the world. Approximate Value of the ENTIRE TSX Venture Exchange ($43.51 B) S&P 500 Liquid Assets Value of Apple ($565.68 B) SOURCES http://www.fdic.gov/bank/individual/failed/banklist.html http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20080804/NEWS05/808040319/1064 http://www.greshams-law.com/2012/05/07/real-interest-rates/ http://money.cnn.com/galleries/2012/pf/1205/gallery.deficit-election.moneymag/4.html http://www.caseyresearch.com/articles/does-central-bank-gold-buying-signal-top-near http://www.randgoldresources.com/randgold/content/en/market-overview http://www.caseyresearch.com/articles/table-set-mania-precious-metals INFORMEDTRADES.COM Our mission is to help traders learn. THE CASE FOR A COMING MANIA IN GOLD Fiat money systems are breaking down. In previous such episodes, the result has been a significant increase in the price of gold. Consider the evidence: Demand for gold is rising because.. 1. BANK FAILURES More banks and brokereage houses are failing, showing the existing system is breaking down. This causes demand for alternate stores of wealth, like gold, to rise. Bank Failures in the US 2. NEGATIVE REAL INTEREST RATES Savings earn no interest, but prices are still rising -- so purchasing power is declining. Demand for reliable stores of wealth grows. 446 Real Interest Rates Interbank rate less YoY growth rate in CPI as of March 2012 -3% -2.9% -2.5% -9% -4% 11 UK EU USA Canada China 2003-2007 2008-2012 3. UNSUSTAINABLE DEBT The higher debt goes as a percentage of GDP, the more likely 4. CENTRAL BANKS ARE will need to be printed to pay the debt -- which could money turn to a crisis of confidence in the currency and a flight to forms of money that cannot be printed. BÜYING Are they preparing to re-introduce gold into the monetary system? Debt as a Percentage of GDP Q1 2012* 208% Aggregate Central Bank Gold Accumulation CASEY RESEARCH Thousand Tonnes 165% 31.4 31.2 31.0 120% 30.8 30.6 80% 69% 30.4 30.2 44% 30.0 29.8 China Q4 2008 Q1 Q2 03 Q4 Q2 Q3 Q4 2010 2010 Q1 Q2 2011 Q4 Jaрan Greece Italy UK US 2009 2009 2009 2009 2010 2010 2011 2011 2011 2012 O Cosey Research 2012 Source: World Gold Council *Excludes intragovernmental holdings And supply cannot match demand's growth because... 4. THERE'S NOT MUCH GOLD LEFT In spite of rising gold prices, discoveries are declining. 5. IT'S A SMALL MARKET Forecasted Gold Production (in thousands of tons) If just 1% of the physical US dollars were used to buy gold Eagles, it would be 13X more than the entire value of all coins purchased in 2011. 2,750 2,710 2,710 2,675 2,650 2,605 1% of M1 Money Supply 2,470 2,430 2010 2011 2012 2013 2014 2015 2016 2017 All gold coins purchased in the US in 2011 6. IT'S A REALLY SMALL MARKET US M1 Money Supply Current value of exchange-traded gold products is 2.1% of the current assets held by S&P 500 corporations. What if big corporations diversify into gold? Value of ALL 7. SERIOUSLY, IT'S A REALLY SMALL MARKET exchange-traded gold instruments The TSX Venture Exchange is where most startup gold exploration stocks are listed. Apple is the single most value company in the world. Approximate Value of the ENTIRE TSX Venture Exchange ($43.51 B) S&P 500 Liquid Assets Value of Apple ($565.68 B) SOURCES http://www.fdic.gov/bank/individual/failed/banklist.html http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20080804/NEWS05/808040319/1064 http://www.greshams-law.com/2012/05/07/real-interest-rates/ http://money.cnn.com/galleries/2012/pf/1205/gallery.deficit-election.moneymag/4.html http://www.caseyresearch.com/articles/does-central-bank-gold-buying-signal-top-near http://www.randgoldresources.com/randgold/content/en/market-overview http://www.caseyresearch.com/articles/table-set-mania-precious-metals INFORMEDTRADES.COM Our mission is to help traders learn. THE CASE FOR A COMING MANIA IN GOLD Fiat money systems are breaking down. In previous such episodes, the result has been a significant increase in the price of gold. Consider the evidence: Demand for gold is rising because.. 1. BANK FAILURES More banks and brokereage houses are failing, showing the existing system is breaking down. This causes demand for alternate stores of wealth, like gold, to rise. Bank Failures in the US 2. NEGATIVE REAL INTEREST RATES Savings earn no interest, but prices are still rising -- so purchasing power is declining. Demand for reliable stores of wealth grows. 446 Real Interest Rates Interbank rate less YoY growth rate in CPI as of March 2012 -3% -2.9% -2.5% -9% -4% 11 UK EU USA Canada China 2003-2007 2008-2012 3. UNSUSTAINABLE DEBT The higher debt goes as a percentage of GDP, the more likely 4. CENTRAL BANKS ARE will need to be printed to pay the debt -- which could money turn to a crisis of confidence in the currency and a flight to forms of money that cannot be printed. BÜYING Are they preparing to re-introduce gold into the monetary system? Debt as a Percentage of GDP Q1 2012* 208% Aggregate Central Bank Gold Accumulation CASEY RESEARCH Thousand Tonnes 165% 31.4 31.2 31.0 120% 30.8 30.6 80% 69% 30.4 30.2 44% 30.0 29.8 China Q4 2008 Q1 Q2 03 Q4 Q2 Q3 Q4 2010 2010 Q1 Q2 2011 Q4 Jaрan Greece Italy UK US 2009 2009 2009 2009 2010 2010 2011 2011 2011 2012 O Cosey Research 2012 Source: World Gold Council *Excludes intragovernmental holdings And supply cannot match demand's growth because... 4. THERE'S NOT MUCH GOLD LEFT In spite of rising gold prices, discoveries are declining. 5. IT'S A SMALL MARKET Forecasted Gold Production (in thousands of tons) If just 1% of the physical US dollars were used to buy gold Eagles, it would be 13X more than the entire value of all coins purchased in 2011. 2,750 2,710 2,710 2,675 2,650 2,605 1% of M1 Money Supply 2,470 2,430 2010 2011 2012 2013 2014 2015 2016 2017 All gold coins purchased in the US in 2011 6. IT'S A REALLY SMALL MARKET US M1 Money Supply Current value of exchange-traded gold products is 2.1% of the current assets held by S&P 500 corporations. What if big corporations diversify into gold? Value of ALL 7. SERIOUSLY, IT'S A REALLY SMALL MARKET exchange-traded gold instruments The TSX Venture Exchange is where most startup gold exploration stocks are listed. Apple is the single most value company in the world. Approximate Value of the ENTIRE TSX Venture Exchange ($43.51 B) S&P 500 Liquid Assets Value of Apple ($565.68 B) SOURCES http://www.fdic.gov/bank/individual/failed/banklist.html http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20080804/NEWS05/808040319/1064 http://www.greshams-law.com/2012/05/07/real-interest-rates/ http://money.cnn.com/galleries/2012/pf/1205/gallery.deficit-election.moneymag/4.html http://www.caseyresearch.com/articles/does-central-bank-gold-buying-signal-top-near http://www.randgoldresources.com/randgold/content/en/market-overview http://www.caseyresearch.com/articles/table-set-mania-precious-metals INFORMEDTRADES.COM Our mission is to help traders learn.