Saturday, October 30, 2010

Fund Manager: Gold $10,000 An Ounce

There are gold bulls. And then there is Shayne McGuire. The 44-year-old pension-fund manager from Texas, who spoke recently at a gold conference in Berlin, caused a stir among the roomful of gold aficionados. His provocation: A book that predicts the price of the precious metal could soar to $10,000 an ounce, more than seven times its current price.

Like those who once boldly predicted $1,000 Internet stocks and a 36000 Dow Jones Industrial Average, Mr. McGuire is a lone voice among mainstream investors suggesting such an outsize price jump in gold's price.

Mr. McGuire's view isn't idle prognostication. He runs a $330 million gold portfolio at the Teacher Retirement System of Texas. Mr. McGuire's forecast, which he made in the recently released book, "Hard Money," makes him a very far outlier. Most on Wall Street consider the prediction outlandish.

"If you missed" gold's recent run-up "you have to come up with some pretty sophisticated reasons to buy" now, says Andy Smith, metals analyst with Bache Commodities, a unit of Prudential Financial Inc.

Mr. McGuire was early to the gold trade. In 2007, he and a colleague persuaded the $100 billion Texas fund, the nation's eighth largest, to move into the metal. It was a novel strategy that made it one of the few large U.S. pension funds to have a fund solely devoted to gold.

At the time, gold was trading at around $650, less than half its current price.

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  1. The price of Gold may be, and is ,currently manipulated up by speculators managing the markets ,using derivitive futures, bets etc.
    And the price may soon have a big rise temporarily as it tends to do in currency panics, like in the coming collapse of the dollar hegemony in world trade and finance.

    Fiat money and the Cental Reserve banking counterfeit paper money system may be discredited.
    The ruling elite might then attempt to get their old fractional reserve banking system working again as it did in the past ,with full or partial 'gold backing" shams.
    But in the end ,Gold will find its real value as a medium of exchange and convenient store of wealth .
    That price , is the cost of the socialy necessary labor time needed for its extraction from the earth and for smelting into bar and coin , plus average industry profits gained in the process.

    There is a lot of subsistance income level labor available in the world that will be eager to get to work if the price rises, especialy in a worldwide economic deppression.

    As the price rises, previously "unexploitable" gold sources will be tapped in the competition.
    If Gold rose to that $10,000 dream ,half the people of the third world would become prospectors and miners .

    So the future Gold supply may not be as little as expected .

    Silver supply may be a little different, if in a depression ,there is cut back in world manufacturing that uses , say copper or lead ,as raw materials ,as silver is usualy mined as a by-product in the production of other mineral resources.

    Like water, the gold price, will find its proper 'natural" price level, in practice by equal exchanges of value.

  2. The question may not be if Gold is $10,000 but how much value US dollars and other paper fiat money has when people lose confidence in it or look at relation between government and bankers. The French right now are calling for Bank runs and this idea is spreading across Europe thru the Internet.

  3. Gold doesn't really go up in value, it's more the dollar is collapsing. If gold goes to $10k USD that means the USD is pretty much worthless. USD has been devalued over time but within the past couple of hears it's pretty much dropped to a fifth or so of its former purchasing power, although due to market forces the loss is only about a half.

    But if it goes to $10k in a short time, that would mean the dollar fell so far that it became worthless, which means society as you know it would be crumbling. Nobody would even really trade or use USD at that point, which then mean you'd need some other index of worth. That would take time to develop. I don't see PMs just stepping in instantly.

    In Ancient Rome they began to debase the currency as well before the collapse. They still had PMs in their coins and the coins were still used as money though.


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