Doug Casey on Gold’s New High, the Fed, and the Greater Depression

Friday, November 12, 2010
By Paul Martin

by Louis James, Editor, International Speculator

L: Good evening Doug. The Fed’s new $600 billion liquidity injection pushed gold to new records, at least in current dollars, topping our $1400 target for this year. Our gold stocks are up even more. Even the World Bank is suggesting that a return to some sort of gold standard might be worth considering. Does the market feel “toppy” to you? What do you make of the latest numbers?

Doug: Well, first, it’s fascinating that the head of the World Bank is actually talking about gold. That signifies a huge sea change. Especially in that the IMF has been a huge seller of gold, and the world’s central bankers have the lowest percentage of their assets – ever – in gold.

I’ve long said, bull markets have three phases. This is classic market theory, nothing unique to me. There’s the Stealth Phase, when prices are extremely cheap and everyone hates the investment – or if they don’t hate it, they’ve forgotten about it. That’s long gone for gold, this time. There’s the Wall of Worry Phase, when people know it exists, and it seems likely to go higher, but people deny it, or find all sorts of reasons to believe that every correction along the way up means the market has peaked. I think we’re in the late stages of this market phase, and heading into a real Mania for gold – manias being the third phase of classic bull markets.

L: If $1400 is just a step along the path, how high do you think gold could go?

Doug: I don’t know. There are lots of numbers out there from people making different projections. If you think of a manic peak similar to that of 1980, you get an inflation-adjusted figure of $2250, just to match that peak. If you use John Williams’ Shadow Government statistics, which I believe are much more accurate, you get a number over $3500.

Just to redeem the approximately $7 trillion owned by foreigners would need gold at about $25,000 an ounce. But if you take the U.S. national debt – say $14 trillion, which is a gross understatement – and divide it by the 262 million ounces of gold thought to remain in Fort Knox – you get a number in excess of $50,000 per ounce.

Spending as much time in Argentina as I do now, it’s becoming much more natural for me to assume that government numbers are cooked up to suit. It seems to me that American politicians have taken a lot of lessons from the Kirchners. The numbers are getting so big, perhaps Obama will have to ask his science advisor what comes after a trillion.

The Rest…HERE

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