Gold to $10,000? This Analyst Thinks So

gold600X300From BMG Bullion: Many investors and their financial advisors consider gold to be a commodity, which makes gold no different than copper, timber, pork bellies or orange juice. They do not understand, or simply are unaware, that gold has been successfully used as money for over 3,000 years. Although some people think it is an archaic relic, the facts don’t support this view. So, what is money?

Gold is traded on the currency desks of all major banks and brokerages, along with dollars, euros, yen and pounds, and not the commodity desks along with other commodities – the FX traders know gold is money.

On the balance sheets of all central banks, gold is classified as a monetary asset, along with their foreign currency reserves. The central bankers know gold is money. Central banks do not hold any other commodity as part of their reserves. Alan Greenspan knows gold is money, as he laid out in his famous article “Gold and Economic Freedom”, written in 1966, before he became chairman of the Federal Reserve.

According to London Bullion Market Association (LBMA) statistics, the daily turnover of gold is $23 billion. Turnover is the difference between buys and sells, whereas the volume is the sum of the two.  Although volume is not published, estimates are that it is at least seven times the turnover, or about $175 billion per day. This magnitude of volume confirms gold is traded as money, not as a commodity. As a comparison, the daily volume of copper is less than $4 billion per day as traded on the Chicago Mercantile Exchange.

One of the most important attributes of gold is that it is negatively correlated to financial assets, such as equities and bonds, and non-correlated to commodities.

Correlation Table of Commodities. Monthly correlations from january 2009 to June 2016

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