Turk - Incredible Chart, Look For $12,000 Gold & $600 Silver
On the heels of weakness in gold, today James Turk shared with King World News exclusively an absolutely fantastic chart which shows that gold is headed to $12,000 and silver to $600. The chart below is extraordinary and Turk provides some intriguing commentary as well.
Eric King: “If gold and silver are forming a major bottom and putting an end to this bear phase in the metals, where do we go from here longer-term?”
Turk: “My view is that we are in a fiat currency bubble, in other words currency backed by nothing. If you look at history, whenever you have these kinds of periods where people think they can come up with some new kind of currency, it’s absolutely crazy some of the harebrained schemes (people come up with).
What we have now is another harebrained scheme that says currency can be backed by nothing except government promises. But when you take gold out of the monetary system, what monetary history always shows is that you remove the monetary discipline from government spending.
We are in an environment now where the government is spending more and more money, borrowing more and more money, the central bank is turning that money into currency, and eventually this is going to lead to hyperinflation....
“I was looking at the cash flow situation of the US government. Back in the 1990s and in the first part of the century, the government was spending, in gross interest expense, approximately 20% of all of the revenue that was being received.
Now, even though the debt has gone up, because interest rates have gone down we’ve dropped to about 14% or 15% of revenue being spent, but it looks like it’s starting to turn. The new debt being added to the US government and the interest rate burden which is resulting from that is now starting to go into the power of compounding.
In other words the government looks like it’s probably at the stage where it needs to borrow just to start paying interest. When that happens you are in the early stages of hyperinflation. Maybe that’s what the stock market is telling us because when you do have hyperinflation, you see the stock market going up and up, not because of valuations, but because people are exiting the currency.
So, to answer your question, Eric, longer-term my targets are still very much in place. My GoldMoney Index shows that the fair value of gold is now $12,000 per ounce. If we get anywhere close to that and the gold/silver ratio falls down to 20, which is closer to historical norms, we are talking about a silver price of $600 per ounce.
King World News Note: Point 1 highlighted on the chart shows the dollar was artificially overvalued for a period of time. Points 2 and 3 show gold reaching overvaluation in the early 1970s and 1980 time frames. If you look at point 4 on the chart, you will see an enormous chasm has developed between the fair value for gold and the actual price. Over time this gap will not only close, but eventually gold will go to overvaluation just like it did on two separate occasions during the 1970 to 1980 bull market in gold.
So at these levels, as long as you are taking a long-term view and recognizing the monetary problems that we face, and that these problems are likely going to lead to a blow up in terms of the currency, who is to say how high these precious metals could go? But clearly I remain in the bullish camp.”