Citigroup says gold could rise above $2,000 next year as world unravels

[Sassy]

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3526645/Citigroup-says-gold-could-rise-above-2000-next-year-as-world-unravels.html

Citigroup says gold could rise above $2,000 next year as world unravels
Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

"They are throwing the kitchen sink at this," said Tom Fitzpatrick, the bank's chief technical strategist.

"The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

"Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes," he said.

"This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised."

read complete article at link above - this is kinda chopped up... 

[Sassy]

"Behind the scenes at the G20 summit in Washington, world leaders discussed not only future financial regulations, but also the possibility of an international central bank, according U.S. congressman Ron Paul."

http://www.russiatoday.com/guests/video/1833

[wildbil]

this bank wouldnt be owned by the same private bankers that own the fed would it?

Didnt we fight the revolutionary war over this stuff already? Americans are so spoiled and have this "will never happen to me" attitude. far as I'm concerned its already too late.

[considerations]

China Daily News

Chinese tourists go house-hunting in US: paper (Xinhua)
Updated: 2008-12-08 13:53

LOS ANGELES -- Chinese visitors have been seeking to buy foreclosures and other bargain properties in the US plunging housing market in recent months, a newspaper reported Sunday.

The trips are part of a broader trend of individuals and businesses in China seeking greater investment opportunities abroad, the Los Angeles Times said.

"With housing prices crashing in the United States, home-buying trips to America are becoming one of the more popular tour group packages in China," the paper said.

Overseas Chinese have been buying US properties for years. What is different now is that they are starting to do it in large groups and quite openly, said the paper.

"Before, it was kind of private, a quiet thing among friends," Jamie Lee, a Chinese American who runs the Los Angeles Convention and Visitors Bureau office in Beijing, was quoted as saying. "Now it's full-blown... It's huge."

The Chinese do have a lot of cash to spend. The Boston Consulting Group estimates that there were more than 391,000 millionaire households in the Chinese mainland last year, up from 310,000 reported the previous year.

Home prices in the United States have fallen more sharply than in China, and many Chinese consider the American market a highly alluring place to invest and live because of the United States' developed economy, the paper said.

[peternap]

I wish I could predict gold. I have some and don't plan to sell it or at least won't sell it until necessary....$2,000.00 seems a little steep but who knows. If the economy improves through some divine act, it can sit dormant for years.

I guess the real question before buying more now is...
HOW LOW WILL YOU GO?

[Squirl]

The spot price and the actual market price are very different right now.  I just sold an ounce of gold for 950 and the spot price is 766 and falling.  I just sold silver at $14 when it is at 9.75.

[muldoon]

The spot price and the actual market price are very different right now.  I just sold an ounce of gold for 950 and the spot price is 766 and falling.  I just sold silver at $14 when it is at 9.75.

It's called backwardation.  the futures market is showing that the price of gold in the future is less than the price of gold today.  It's rare, but not unfounded.  I have read that this is the first time it has happened to gold.  I do not know if that statement is valid or not but I do know it has happened in oil a few times over the decades.  It happened to oil in June of this year for what its worth if you want to look at what happened to price action there.

As for why?  Why on earth would it be cheaper to buy gold in February than January?  For decades gold has always traded slightly above spot, because of inflation.  It is expected that in a few months a percent or two would be gained by the asset and thus the premium made sense.  Now the world is not facing any inflation but infact the very opposite.  It is expected that futures markets would reflect this in pricing, because from here on out the price of everything continues to drop in a downward spiral. 

Today was a first for something else, or at least in the united states.  A negative yeild on US bonds.  yup, were selling 32billion in 4 month bonds at a yield of 0%.  Actually 18% of those buyers were less than 0% but the yield wasn't reported.  It was reported thay a negative print occurred.  It happened in Japan during the 90s but I am not aware of this occurring anywhere else ever.  What does it mean?  It means that people are so scared they will accept a negative return on their money so long as they get their money returned.  They are willing to pay the us government for money storage, thats how bad the trust model is broken. 

How could that make any sense?  Because if the rate of inflation was -2% and you made -1% then you actually came out ahead.  If the debt market is expected negative growth or outright deflation it is expected that the gold futures market would reflect this too. 

There was an article or two out in the past few days on this backwardation phenomenon, with the author drawing the conclusion it meant the fall of comex and globex were eminent.   The premise of those articles were roughly that physical was selling at a premium to paper because people feared the paper would be worthless over time.  It fails to take into account the negative interest rate print and a basic understanding of the velocity of money - which for public markets is fastly approaching zero.  Basically we may have trillions in fresh money however they are doing this dance:

Fed -> Treasury -> Banks -> Fed -> Treasury ... 

Unless that money hits the economy there is no velocity of money.  Without that there can be no inflation, only the spiral that futures markets (and bond markets) are predicting.  As gold is priced on the futures markets; it is inline with nearly every other asset class on the planet.  In a race to the bottom. 

-- As for the premise of the article, would you really trust citibank for investment advice?