Dear Friend of GATA and Gold:
Zero Hedge today called attention to another thoughtful speculation on the rationale for an official revaluation of gold to a price far higher than the current paper-suffocated price. It was written by the chief investment officer of Guggenheim Partners in New York and Chicago, Scott Minerd, who concentrates on an angle often raised by Jim Sinclair, the (purported) U.S. gold reserve’s “coverage ratio” of the U.S. money supply.
Minerd writes: “The U.S. gold coverage ratio, which measures the amount of gold on deposit at the Federal Reserve against the total money supply, is currently at an all-time low of 17 percent. This ratio tends to move dramatically and falls during periods of disinflation or relative price stability. The historical average for the gold coverage ratio is roughly 40 percent, meaning that the current price of gold would have to more than double to reach the average. The gold coverage ratio has risen above 100 percent twice during the 20th century. Were this to happen today, the value of an ounce of gold would exceed $12,000.”