How QE3 Could Bring About $5,000 Gold & $1,000 Silver -
Rocky Vega
In his recent commentary, Ambrose Evans-Pritchard sees the world nearing a revived gold standard as the US, Europe, and Japan all continue testing the limits of maximum sovereign debt levels. With potential for QE3 - a third round of the Federal Reserve's quantitative easing program - on the horizon, governments around the world must consider alternatives to the US dollar and other paper money. These developments are likely to continue impacting precious metal prices.
From The Telegraph:
"'It is very scary: the flight to gold is accelerating at a faster and faster speed,' said Peter Hambro, chairman of Britain's biggest pure gold listing Petropavlovsk. 'One of the big US banks texted me today to say that if QE3 actually happens, we could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money.'
"China, Russia, Brazil, India, the Mid-East petro-powers have diversified their $7 trillion reserves into euros over the last decade to limit dollar exposure. As Europe's monetary union itself faces an existential crisis, there is no other safe-haven currency able to absorb the flows. The Swiss franc, Canada's loonie, the Aussie, and Korea's won are too small.
"'There is no depth of market in these other currencies, so gold is the obvious play,' said Neil Mellor from BNY Mellon. Western central banks (though not the US, Germany, or Italy) sold much of their gold at the depths of the bear market a decade ago. The Bank of England wins the booby prize for selling into the bottom at €254 an ounce on Gordon Brown's orders in 1999. But Russia, China, India, the Gulf states, the Philippines, and Kazakhstan have been buying."
Evans-Pritchard notes that China in particular delays and obscures its large gold accumulations. It has already recently doubled its holdings and plans to continuing growing its hoard from 1,054 to roughly 8,000 tonnes. Another strategic buyer of gold he cites is Switzerland, which has hearings underway on how to develop a "a parallel Gold Franc." You can read additional details in his Telegraph commentary on how there could be a return to the gold standard as world order unravels.
During the Great Depression, at a certain point, gold stocks started a massive rally. While most things were going down in price, gold stocks made significant gains, becoming one of the best performing sectors during that time. Below is a chart (from sharelynx.com), which illustrates the performance of the gold stocks during this time:
CALVF has some advantages with comparison to USA and Canada - e.g., low taxes; Corporate Income tax at 25% - lower labour cost but a happy work force - Indigenisation program Mugabe talked about for 20 years - but the leading Peoples opposition don't want - year 2015 is a deadline - self declared king pin Mugabe 88yrs old is sadly in serious cancer sickness - Blanket Gold Mines Project - the capacity of the secondary and tertiary crushers was increased to over 2,000 tpd and the capacity of the rod mills was increased to 1,800 tpd. The product from the regrind mill is pumped into a carbon in leach ("CIL") plant consisting of eight, 600 cubic meter leach tanks equipped with 45 kW agitators where leaching at 50% solids and simultaneous adsorption of dissolved gold onto activated carbon takes place. The CIL plant has a design capacity of 3,800 tonnes of milled ore per day. Elution of the gold from the loaded carbon and electro winning is done on site. Gold is deposited onto wire wool cathodes, the loaded cathodes are acid-digested and the resultant gold solids are smelted to produce gold bullion of approximately 90% purity, prior to Blanket exporting it directly to Rand Refinery in South Africa for final refining and sale. The full proceeds of sale (i.e. before payment of any royalty) are paid to Blanket's foreign currency account with a commercial bank within approximately 7 days of receipt of the gold by Rand Refineries. http://www.caledoniamining.com/blanket3test2.php
Chinese gold imports from Hong Kong, a proxy for the country’s overall overseas buying, leapt to a record high in September, when monthly purchases matched almost half that for the whole of 2010.
The buying spree follows a sharp drop in the price of the precious metal. After hitting a nominal all-time high of $1,920.30 a troy ounce in September, gold fell to a three-month low of $1,534 an ounce later in the month. Chinese investors snapped up the metal as prices fell.
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