With gold recently pulling back to $1,270, today King World News thought it was a good idea to take a step back and look at the big picture of the war in the gold market. This led to an interesting question: Are the forecasts for the gold price hitting $10,000, $15,000, or $20,000 really possible?
$10,000, $15,000, $20,000 Gold?
October 27 (King World News) – MacroTrends: This chart shows the ratio of the gold price to the St. Louis Adjusted Monetary Base back to 1918. The monetary base roughly matches the size of the Federal Reserve balance sheet, which indicates the level of new money creation required to prevent debt deflation. Previous gold bull markets ended when this ratio crossed over the 4.8 level.
King World News note: The chart below reveals just how far the bull market in gold has to run before it ends in exhaustion. Gold would have to advance 14.5-times in price vs the monetary base in order to hit the 4.8 level highlighted above. If the monetary base just stayed stagnant and the 4.8 ratio is hit, that means the gold price will be heading toward the $20,000 level.
King World News note: There is a massive chasm between the Fed’s balance sheet and today’s gold price…
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This is one of the many reasons the gold price is set for a historic upside surge (see chart below).
Fed Balance Sheet vs Gold Price
King World News note: As KWN promised it would, the long-term Gold/Oil Ratio hit all-time record levels in favor of gold before backing off. Since that time, the ratio has adjusted to just below the 25 level, but still solidly in favor of gold (see chart below).
King World News note: The long-term change in trend in the Gold/Oil Ratio chart above is one of the major reasons why the mining shares continue to be under massive accumulation. Also, the smart money is buying while the mining shares are still near an all-time historic low vs the gold price (see chart below).
Multi-Decade XAU vs Gold Ratio
King World News note: The bottom line is whether the price of gold is headed to $10,000 – $20,000 or not, investors should be accumulating physical gold and silver while they are heavily discounted because of U.S. Fed interference in these key markets. They should also be accumulating shares of high-quality mining companies because of their extreme and historic undervaluation.
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