Gold Follows the Right Path to New Opportunities

Comparing gold to M2 money supply doesn’t tell the whole story. Any comparison of the price of gold to the money supply has its limitations. After all, Endgame doesn’t mean a return to an official gold standard, which is something no one really wants. More importantly, the aforementioned chart only plots the internal US money supply, or M2, against the value of gold. The real question to ask? What about Eurodollars? These dollar variants, which are located outside the US, are not included in the M2 figures, and that is crucial to understand.

The Eurodollar market has grown explosively since 1980. Where it was estimated at around 0,5 trillion dollars that year, it has now grown to around 21 trillion dollars. For comparison, that is roughly equal to the total M2 money supply in the US. Let me give you some perspective: since 1980, the domestic money supply in the US has increased by over 1200%, while the external dollar supply has increased by over 4100%. Which makes the conclusion simple: gold, even against the dollar, still has great upside potential. When we take Eurodollars into account, it turns out that the peak in 1980 should actually have been twice as high.

The Enduring Value of Gold

Silver and platinum are historically undervalued relative to gold at the moment. This certainly gives them potential, but they cannot replace gold. This has nothing to do with what we or anyone else buys, but everything to do with the decisions of the biggest players on the world stage. Central couches, countries and sovereign wealth funds have made their choice. They are increasing their gold reserves and at the same time reducing their dollar position. The charts confirm this: central banks are reducing their dollar percentage in reserves and significantly increasing their physical gold reserves.

What after Endgame?

In my (obviously non-existent) crystal ball I see a recapitalized and much more stable financial system after the Endgame, with a high but also relatively stable gold price – measured in purchasing power. Savers will then have real choices for the first time in a long time. Physical gold, which is legally owned, can then compete with savings accounts at the sofa. After all, most people are savers by nature, not speculators. Nowadays, people seem forced to invest their surplus money, while many actually just want security: the guarantee that their nest egg will remain intact.

The Future of Silver and Platinum

These topics will be discussed in depth next week, but here’s a sneak preview: According to the Silver Institute, there will be a physical shortage of approximately 187 million ounces on the silver market this year. Total expected production is 1.030 million ounces, while expected physical demand is a whopping 1.148 million ounces. That means demand is 11% greater than supply from mines and recycling.

Silver would need to rise more than 50% in dollar terms to match 2011 prices – and that’s without even accounting for inflation. As for platinum? We see a real chance of a major squeeze here, as there’s a surprising amount of physical platinum being taken off the market.

Frequently Asked Questions

Why are Eurodollars important in comparison to gold?
Eurodollars are dollars that are held outside the US and are not included in the M2 money supply. They have a huge influence on the global money supply and are essential to understanding the full picture of the gold price.

What makes gold the ultimate reserve asset?
Gold is a neutral reserve asset, due to its stability and reliability, that is increasingly accepted by central banks. It offers a safe haven during financial turmoil and is increasingly chosen by major players worldwide.

What can we expect from the silver and platinum market?
The silver market may face a shortage, and silver prices would have to go much higher to match previous peaks. Platinum may even see a sharp price increase due to the devaluation of reserves.