By Michael J. Kosares The world's investment community, including besieged private investors, is reeling at the twin terrors of sovereign financial breakdowns on both sides of the Atlantic. Gold has responded by rising nearly $150 in less than a month under heavy global demand. No sooner does the dust settle in Europe than something is kicked up in the United States, or vice versa, complicating the decision-making process and narrowing the options. We thought it would be interesting to catalogue in one place the best quotes on gold going over $1600 -- the thought-provoking, the witty, the profound (not necessarily in order of preference).
"Ron Paul last week asked Chairman Bernanke during the Humphrey Hawkins type hearings if he thought gold was money and he (Bernanke) said, 'no.' My answer would have been, it's better than money. Yes, $1,600 gold is insulting central bankers in the following fashion, it's saying gold is going up because what you are doing to the fiat currencies of the world is not tolerable to smart investors."
Rick Santelli, CNBC analyst
"They'll print money until we run out of trees."
"[I]n 1980 the only players were the Americans, they were essentially the only players in the gold market, or the dominant players. Today the dominant players are China and India, 58% of all the gold sold this year will be sold in these two countries. So they are by far the dominant players and as I've said the Chinese love gambling. When we reach that phase (the mania) I told you and I will tell anyone who wants to listen, watch out because it will truly make your head spin."
Pierre Lassonde, famed mining entrepreneur
"I pay attention to the price of gold. But I think it reflects a lot of things. It reflects global uncertainties. I think the reason people hold gold is as protection against of what we call tail risks, really, really bad outcomes. And to the extent that the last few years have made people more worried about the potential of a major crisis then they have gold as a protection."
Ben Bernanke, Fed chairman
"China's frenzy for gold prompted the central bank to step up sales this year of gold and silver Panda Coins.The People's Bank of China plans to sell 500,000 1-ounce gold coins, or 66 percent more than its earlier target of 300,000. It also tripled sales targets for half-ounce, quarter-ounce, 1/10-ounce, and 1/20-ounce gold coins to 600,000 each from 200,000 earlier."
Reuters report, 7/21/11
"Record high prices won't scare away [Chinese] investors, Investors are likely to chase the rally and continue to buy gold because paper money feels increasingly worthless and they are worried about inflation."
Shi Heqing, Antaike - China state-backed metals consultancy
"I think it was the foundation for people to start thinking that maybe gold's not headed to $1,650 an ounce or $1,700 an ounce, maybe it is headed toward $1,800 an ounce or even $2,000 an ounce."
Michael Jansen, J.P. Morgan
"A close above $1,600 on gold, similar to silver closing over $40, would create a huge bunch of short-covering. The commercials have been adding short positions in gold, but should we get a close above $1,600, I think you will find the smaller of those shorts are going to start covering their shorts because it's going to be too much pain. This could result in a $50 move overnight."
Anonymous London gold trader quoted at King's World News
"If you held gold or silver, it was a pretty good week. If you own your own house, it pretty much amounts to where you live. If you live in Vegas or Phoenix, you bought in the wrong area. If you bought in San Diego or San Francisco you've done right. If you saved your dollars for "a rainy day," you probably wonder what you can buy with your dollars. If you saved your gold for your old age, you've probably already sold your gold for dollars, and what the hell, 'let it rain.'"
Richard Russell, the dean of investment newsletter writers
"Warren Buffett's problem is that he only understands balance sheets and earnings. The value of a Picasso or a gem diamond or a bar of gold is outside Buffett's understanding. Which is sad, because Buffett's lack of understanding has kept many an American on the sidelines while gold surged higher in terms of Buffett's beloved paper currencies."
Richard Russell, the dean of investment newsletter writers
"Central banks have the will to increase gold holdings, but it is not a practical option and rather difficult. Gold supply simply doesn't grow as fast as China's foreign reserves. Only the increase in U.S. debt can match that. . .We can buy whatever with our money without causing price distortion, but a $2-trillion, $3-trillion [gold purchase] elephant will certainly cause distortion."
Dong Tao, Credit Suisse
"One of the big US banks texted me today to say that if QE3 actually happens, . . We could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money."
Peter Hambro, chairman, Petropavolsk
"We expect $1900 gold by October."
John Taylor, FX Concepts
"[As an option] the US Treasury could eliminate the Fed's entire holding of Treasury bonds at a stroke, gaining an extra two years. This would be a simple accounting transaction. Ben Bernanke might feel uncomfortable, and gold might blast to $3,000, but the Bernanke Fed has proved itself supple."
Ambrose Evans-Pritchard, The Telegraph
"The 'fiat' dollar is one of the world's astounding monetary creations. That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It'll be 40 years next month that the dollar has been purely faith-based. I don't believe for a moment it's destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded, and so destructive of the economic activity they are supposed to support and nurture that they will be replaced by something better."
James Grant, Grant's Interest Rate Observer
"I think there's a really high chance, this is the year that you do not want to fight the gold market. This is a trend that you just have to bite the bullet and be invested and go with it, I feel very strongly about that. Various liquidity is going to be coming from all corners of the world. At no time has gold pulled back throughout any of this credit tightening process, the market is going higher. We are in my opinion going to see a $2,000 handle this year."
Ben Davies, Hinde Capital
"I just calculated if we take an average gold price of say around $350 in the 1980s and then we compare that to the average monetary base in the 1980s, and to the average U.S. government debt in the 1980s. But if I compare this to the price of gold to these government debts and monetary base, then gold hasn't gone up at all. It's gone actually against these monetary aggregates and against debt it has actually gone down. So I could make the case that probably gold is today very inexpensive."
Marc Faber, The Boom, Gloom and Doom Report
"We have liked gold for a long time and we remain very constructive. It is more than just a hedge against recurring bouts of global financial volatility. The growth rate of gold production is roughly stagnant while the growth rate of fiat currency in most parts of the world continues to accelerate. It's all about relative supply curves - the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple."
"Internationally, precious metals will become the preferred reserve assets, not just an important one. Their prices will then relate more closely to the total volumes of each international currency in the world. As you can imagine, the prices of precious metals will then have to be higher than most people even thought possible. With the gold market being such a small one in volume terms, silver will then become a monetary metal too, at considerably higher prices."
Julian Phillips, Gold Forecaster
"July/August is traditionally a weak time for gold. Purchasing from Asia - perhaps the main gold price driver - falls off, picking up again once festival seasons start in late Summer/early Autumn. Yet gold is standing at an all-time high as August approaches. That should indeed be telling us something. The chickens are coming home to roost and gold will continue to be the major beneficiary. This writer was looking to see gold in the $1700s by year-end in Mineweb's January gold price competition. This is beginning to look as if it could be a very conservative prediction indeed!"
Lawrence Willliams, Mineweb
Michael J. Kosares has nearly 40 years experience in the gold business and is the founder/owner of USAGOLD-Centennial Precious Metals, Inc. He is the author of The ABCs of Gold Investing: How to Protect and Build Your Wealth With Gold as well as numerous magazine and internet articles. He is frequently interviewed in the financial press and is well-known for his ongoing commentary on the gold market and its economic, political and financial underpinnings.
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