gold could reach $6,400

Gold

So whilst many paper currencies become virtually worthless in the next few years, gold will continue to do what it has done for 6,000 years. It will maintain its purchasing power and therefore appreciate substantially against all paper currencies.

The recent correction in gold is the weak hands getting out of speculative positions in the paper gold market. There has been virtually no selling in the physical market.

So far gold has gone up more than four times in the last ten years in a stealth market that very few investors have participated in. There is no other asset during this period that has given such an excellent return whilst at the same time providing the highest form of wealth protection (provided it is physical gold).

Shadowstats.com is a superb service which analyses government statistics on a true basis, taking out all adjustments, revisions and other manipulations. Applying the true inflation rate on the gold price shows that the gold high in 1980 of $ 850 in todays terms is $ 6,400.

Governments have suppressed the gold price in the last 30 years by both overt operations (official gold sales) and covert operations (manipulations in the paper gold market and unofficial sales). Central banks are supposedly holding 30,000 tons of gold but credible estimates suggest that this figure is around 15,000 which means that 15,000 tons of central bank gold has been sold covertly to depress the price. But the effect of manipulation of any market has a limited time span, especially if it is done in connection with a total mismanagement of the economy. Central banks have now stopped official sales and China, India, Russia and many other countries are major buyers. Production is falling steadily and investment demand is soaring. With the fundamentals so much in golds favour, it should have no problem to reach the 1980 inflation adjusted high of $ 6,400. With inflation or hyperinflation gold will go a lot higher than that.

During the next phase up in gold which we expect to start within the next few weeks, main stream investors will discover what only a few investors have understood in the last ten years, namely that physical gold is one of the very few ways to protect their assets and preserve capital.

http://www.gold-eagle.com/editorials_08/greyerz021110.html