PHYZZ Owners Rejoice: Forbes Makes the Case for $10,000 Gold - sort of

Central Bank Appetite And The Monetary Case For $10,000 Gold - Forbes
What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks? An exceptionally potent formula for higher gold prices that could send gold to the unimaginable level of $10,000 an ounce.

China and India, have negative real interest rates sitting around negative 2 percent. Simply put, investors in those countries who have parked their savings in cash and low-yielding investments, such as Treasury bills and money market accounts in the U.S., are actually losing money due to inflation. That can be tough for any investor, but when you’re the central bank of a country with millions of dollars in reserves, it can be catastrophic. This is why central banks around the globe have sought protection by diversifying their foreign-exchange reserves into gold bullion this year.

VTB Capital’s Andrey Kryuchenkov told the Wall Street Journal last week that, “Central banks are diversifying, and it has intensified to a rate that nobody had expected.” Latest estimates predict global central banks will purchase between 475-500 tons of gold in 2011. 
 The yellow line below shows how gold would be greater than $5,000 per troy ounce if just half of global money supply were backed by gold. If all of the money supply in the world were to be backed by gold, the price of one troy ounce would need to rise above $10,000. It’s unlikely, of course, that this will happen, but it serves as a useful illustration for the disappearing value of the world’s fiat currencies.

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