SINGULARITY - GOLD ADOPTION RATES LOW
• Today 0.2% would be worth $1.45 trillion ($1800 troy oz. Au) or 0.7% of Global Financial
Assets (GFA).
• Therefore new investment gold only provided 0.26% increase in % gold holdings.
• In 1968 to 1970 % gold holdings of GFA = 5%, to attain this % at current values of gold
($1,800), $10.4 trillion dollars need to be invested.
• $10.4 trillion is equivalent to 5.8 billion troy oz at $1,800 or 1.2 x gold ever produced.
• 5.8 billion troy oz. is 3.6 x known gold reserves (based on US Geological Survey).
• Clearly not only is public ownership miniscule, but to return to the 70s % holdings requires
too much gold than these prices can handle.
• This transfer of gold will take place at much higher prices.

David Fuller's view If you understand that gold has had a monetary value since our species first discovered and learned how to refine the yellow metal, and if you believe that gold will always represent hard money because it is a unique and scarce asset which is no one else's liability, then Hinde Capital's projections for bullion's price make sense.

The only question is: Over what time period? In other words, are we talking about years or millennia?

No one could possibly know the answer to this question so your guess is as good as anyone else's. Also, while the guessing may be fun, it is largely a waste of time. Instead, we should be monitoring technical and behavioural aspects of gold's performance.

For instance, Hinde Capital and other gold fund managers would like more people to buy their funds because they will make more money and rising demand will help to fuel a rising price trend for bullion. Conversely, plenty of other investment managers do not like gold because they think, rightly or wrongly, that its price appreciation could have negative implications for other investments.

Fullermoney has maintained for over a decade that gold was being remonetised in the eyes of investors. This inevitably meant that more people were considering gold as an asset worthy of inclusion in their portfolios, not least as a hedge. However, short-term extremes in sentiment are a contrary indicator. When everyone is bullish and the price is accelerating above its 200-day moving average, as we saw last August, it becomes temporarily overbought. Conversely, when people are more cautious following a pullback to the MA, as we saw in late September, it is probably somewhat oversold within its overall upward trend.

Negative real interest rates (below the rate of inflation) and accommodative monetary policy are tailwinds for gold. Conversely, positive real interest rates (above the rate of inflation) and restrictive monetary policy are headwinds for bullion. Today, monetary conditions are reasonably favourable for gold, although less so than in 2009, due to higher interest rates in growth economies. A flight to cash triggered by a worsening European sovereign debt crisis or any other significant factor would be a headwind. However, in this latter instance gold would probably fall less than a number of other assets, as we last saw in 2008.

Since gold is a monetary asset the strength or weakness of the USD will clearly be a big factor in bullion's performance in that currency. The greenback has been strong recently, as you can see from this chart of the US Dollar Index and the Asian Dollar Index which has fallen, but the US currency has weakened whenever stock markets rallied in recent months.

Lastly, and most importantly, we should consider gold's medium-term uptrend, which I prefer to view on a weekly chart with a 200-day MA. The progression of higher reaction lows evident on this chart are the defining features of the uptrend, which is smoothed by the MA. Accelerations such as we saw in August increase short to medium-term risks because they are unsustainable and followed by corrections. However, we can continue to give the medium-term trend the benefit of the doubt while the price is trading to the left (above) a rising MA and the reaction lows are still rising.

Investors in gold bullion will also want to monitor gold's trend in their local currencies. You will find them in the Relative Charts section of the Library. One of the more interesting of these, and relevant for a number of subscribers, is gold in AUD over 10 years. This has been less consistent than gold in USD during the same period because the AUD has been a strong currency for most of the last decade. Consequently, gold in AUD ranged mainly sideways until the second half of 2005 before surging higher and becoming temporarily overextended. Note the similar sized reactions. When any trend is that consistent, the first reaction which is clearly larger will probably break the short to medium-term momentum. When Eoin conducted TCS in Sydney in early May, there was less enthusiasm for gold in AUD because it had traded sideway for a lengthy period. Nevertheless the lows were still rising and that remains true today.

For additional perspective, here is a long-term chart of gold adjusted for US CPI inflation.

(See also Eoin's comments on gold shares below.)