Wednesday, July 24, 2013

Global Liquidity Indicate Higher Gold Prices

The current level of U.S. dollar global liquidity supports a gold price of $1,780 per ounce, well above the current spot price. There is currently a divergence between the gold price and U.S. dollar global liquidity.
















Click on the above picture to get a larger image.

The long term liquidity trend hint of a potential for an increase in gold price. Western central banks have been selling their gold to non Western central banks and private investors over the past decade, as they replaced their holdings of physical gold with claims on gold (paper gold).

The German Bundesbank will need seven years to repatriate 300 tons out of the 6,200 tons of the New York Fed. ABN Amro has told its bullion customers that redemption of physical gold from their allocated accounts is now impossible. Physical delivery times at the London Metal Exchange has reached 100 days.

Western central banks have managed to increase available supply of physical gold and decrease demand by flooding the COMEX (paper market).

Geir Solem

Elliott Wave Technician
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