Gold PriceMany smart people are starting to talk about QE3.
I was expecting stealth QE3, maybe financing war in Libya or some other capital injection.
The Japan nuclear crises will probably cause an economic slow down as will Middle East and Euro problems.
QE3 will happen via inflation of capital markets and this will bring firm or higher gold prices.
Countries like Brazil, Norway, Australia, Canada, Russia, China and all Middle Eastern oil countries, see their own foreign reserves depreciate via political inflation; it is like a tax on asset base.
Countries may be forced to act together for the global well being; i.e., United Nations, NATO, ECB, FED, G20, Arab League etc. They may not want to act, but must by responsible membership.
For example we saw the French call an emergency global meeting after the Japan disaster; could Canada sell its YEN if it wanted to? Gold is benign to such global institutional actions.
The only solution is for gold to become floating reserve currency, because no one can dictate it political value. The gold price is benign and neutral to all countries.
This becomes even more probable because USA has huge debts.
Most sovereigns borrow in other currencies, so they pay back in hard money compared to their own currency.
The USA borrows is USA dollars, they payback with their own paper dollars. USA debts will be liquidated via long term inflation.
The amount of dollars in global circulation is huge compared to gold. USA debt will just add more dollars to the system.
Gold by default, becomes the only intelligent benign floating rate reserve currency for a global world trade system.
History shows world powers change; from Egypt, to Greek, to Roman, to Europe, Middle East, Turkish, Portugal, Dutch, Spanish, Austrian, British and USA; they raise and fall.
In the early 1800s, China and India was responsible for 75% of world GDP.
World trade will expand and a massive amount of local assets and wealth will be created.
Gold will become a global floating priced reserve currency, a neutral storage of long term wealth, just by default.
The G20 will meet and they will listen to each others BS; and then they will go home and trade gold, it is the equivalent of abstention vote at the UN; it is a benign position. If they do not trade gold on poor policy; the other sovereign traders will smell it and they will do it ASAP.
Look at how the market has the Euro countries on the run and the ECB dancing, always doing the political, logical 2 step dance. Gold has no dance partner.
Other sovereigns do not want to take losses due to political inflation, we see this now in Germany and the Euro problem; Mrs German PM is getting her ball$ squeezed and her head handed to her on a platter. Wait till Spain and maybe Italy comes knocking on her door.
Probably sovereign bonds will take a haircut and people will look to gold that no one can haircut. Gold could get a higher rate of return via new trading instruments.
This is totally different then 1981; when USA protected the world via the cold war.
The dumb guy was the UK chancellor selling all UK gold at $325 per oz.
In future, many countries may not sell hard gold; but prefer to trade gold via the multiple gold markets that are developing such as ETFs and other such modern instruments.
As China, India, Russia, Brazil become major powers with powerful currencies; will Germany convert these currencies back to gold or hold them as a major part of foreign reserves? I would argue Germany will convert, because history tells us these countries will suffer huge social unrest and unstable currencies giving gold stability and floating price reserve currency status by default.
The global asset base is multiplying rapidly as capital is invested into the developing world; huge amounts of assets are created, look at all the oil found off shore Brazil or new housing in China. The global asset base is increasing at a massive rate.
Probably, gold is undervalued compared to global asset base.
PTQ is a big country play for big money; this is why I like PTQ; this is why no insider has sold; it is a huge multi million big $$$$ play for big investors. PTQ is a huge national play and very under valued.