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Delightful speculation on the new gold price needed to back the U.S. dollar

Section: Daily Dispatches

3:35p ET Wednesday, January 19, 2022

Gold Newsletter editor Brien Lundin today calls attention to a new report by Myrmikan Capital's Dan Oliver about the gold price that would be necessary for U.S. gold reserves to back the dollar at levels that once were traditional:

Lundin writes of Myrmikan Capital: "This group has published some amazing analyses in recent months and quickly become one of my favorite sources of macro insights, particularly in relation to the massive bubbles created by decades of the Fed's ever-easing monetary policy.

... Dispatch continues below ...


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"But a report they just issued yesterday -- entitled 'The Bubble Is Bursting and Gold Is Strong' -- exceeds anything I've seen from them before."

You've probably come across speculations like this over the years. Our friend Jim Rickards has offered them authoritatively from time to time.

They usually assume a market price for gold, though GATA has shown that market prices for monetary metals long have been opposed by the most powerful governments:

Other analysts, including the three most often cited by GATA -- the U.S. economists Paul Brodsky and Lee Quaintance and the Scottish economist Peter Millar -- have speculated that the gold price would be driven up spectacularly not by ordinary markets but by central bank decrees aiming to devalue debts and currencies and to reliquefy central banks holding gold.

The Brodsky and Quaintance speculation is here:

The Millar speculation is here:

These speculations are delightful "visions of sugarplums" for investors in the monetary metals, and today's sharp rise in their prices will boost hope that government's derivatives-based scheme of monetary metals price suppression is failing at last.

But this speculation presumes that markets, governments, and central banks eventually will demand gold as backing for currencies, as they did many years ago, rather than choose other commodity (oil is looking pretty good lately) or maybe cryptocurrency. This speculation also presumes that when the derivatives scheme fails, governments will not seek to demolish the appeal of the monetary metals with outright confiscation, confiscatory taxes, or some other fascist mechanism.

How people and governments will react in changing situations is always a speculation in itself. The past may be a guide but nothing requires people and governments to act exactly as they did before.

The only certainty here may be that governments will always want not just to control the value of money but also to control what is considered money.

Oliver's new analysis is posted in PDF format at the Myrmikan internet site here:

Your secretary/treasurer believes that it is hard enough these days to discern what government is doing and so it is impossible to know what government will do, beyond its general objective of cheating people. So his recommendation remains what it always has been: Accumulate all the monetary metal you can, find a safe planet to keep it on, and, when you do, please call. 

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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