Alan Heap, an analyst at Citi Investment Research, recently broke with the dominant bullish view about gold by saying in a research paper, "Gold: Paper Problems," that prices will sink to $820 by June of 2014 and head lower long term to $700 an ounce.
“Alan Heap.. adds a bearish voice to a crowded debate over where the precious metal is headed. Billionaire investor James Rogers and perma-bear David Tice say gold will hit $2,500. James Turk, Author of GoldMoney, predicts $8,000, while author Mike Maloney is betting on $15,000”, The Street.com:
The biggest threat to rising gold prices is a substantial decrease in long positions in paper markets, Heap writes in his report.
"Positions held by money managers and broader non-commercial positions have fallen since November 2009 when the USD strengthened. Non-commercial net long positions are at 5x the average levels seen over the last 17 years." [1]
So is this another “brick in the wall” of the Austrian theory which was supposed to deliver us from the tyranny of fiat money?
The “Austrian” theory of gold is that it is “real money” and Central Bankers are at best morons and at worst, charlatans. Personally, whilst I have no problem with the second point, I do have a problem with the first one.
There are plenty of benchmarks banded about; price gold compared to its price when there was a gold standard (i.e. in 1970) and you come up with $3,600 an ounce, compare it to M3 and you get $5,000 an ounce, use the James Turk “sound money indicator” and you get to $9,391; and if you look at historical trends between the price of the DOW and gold you can come up with $15,000.
That’s if gold is “real money”; but I just wonder; what is “real money”, really.
Or in other words, is there any chance that some time in the future the world will go back to the days when gold was used, day-to-day as money, and that everyone who owns gold will have a bonanza as the central bankers come crawling to them to exchange $15,000 for one ounce of gold, having promised that ratio would be maintained forever and ever and that in the future, forever and forever, they will be “good” and never debase their currency?
I…
