a possible scenario ?!?, page-8

"Some people in the business are predicting that the price of gold will come back to around USD $1,100 mark in the long run "

I hope this are not the same guys who never saw gold reaching where it is now in the first place.

2008 gfc was Problem within the SYSTEM
Sovereign Crisis is problems of the SYSTEMs


Though there have been Sovereign crises in the past never before we had so many countries with a potential to default at the same time, along with the ability to bring down other countries Central banks due to huge interconnectedness between them.
Germany, france are bailing out its periphery breathens not to save PIIGS but to save thier own banks from defaulting due to heavy exposure to troubled countries debt.
US banks/pension funds also has huge exposure to them, so A good chunk of QE2 was used to bailout Euro countries via IMF.

Austerity is good on papers but very difficult to implement real time present day politicians, its means cutting down public spending, medicare, entitlements, pensions etc
For eg.
#. The voilent austerity protest across the greece spain italy etc are a very short demo of what it means when you cut public benifits of the masses which over the years have become heavily dependent on it.
#. In US the tea party movements have been talking very loudly about fiscal conservatism but when asked if they are willing to cut down on thier own entitlements and benifits most cadets were not so sure, so in short they are preaching "Cut some else entitlements/benifits but leave my alone"

The problem in euroland are structural and not cyclical.

US/EURO debts and future liabilities are such huge that dont have an easy option left,
So what are the options
1. Out grow the debt: Highly unlikely
2. Default: unlikely due to huge interconnectedness.
3. High infation a.k.a. financial repression: highly likely

What's driving gold?
It's the real interest rate.
If risk-free returns are negative after inflation (negative worldwide), then we have got the driver around the world for higher gold prices.

Volatilty of Gold is reflective of the wild gyrations in currency markets, I am not sure if gold is a best inflation hedge but its definitely an leading indicator of mistrusts in fiat systems worlwide. We are in currency war which is a race towards devaluation, I feel sooner than later Gold will play a monetary role in some capacity as it has done thru out the history of mankind.