HOW TO VALUE GOLD

As I've noted many times, there are all sorts of metrics used to value gold.  All are imperfect.  You can make statistics say what you want.  Every forecaster has a "fair gold price" target.  Pierre Lasonde calls for $20,000 gold over 20 years.  Bank of America calls for $3000 dollars gold over 18 months.  Chuck Butler (whom i enjoy reading in the Daily Pfennig) figures that if every nation buys into a common gold backed currency gold would be price at about $10,000 an ounce.  Most every banking house  has $1800 minimum by the end of the year.

Here's how I figure it.  Right now gold is hovering around $1700.

That's two months into a crisis wherein most Politicians and Wall Street TV regulars are assuming a "return to some normalcy" by the fall.  This prognosis also assumes a fair amount of pent up demand which will power some kind of rebound and return to positive growth in the global economy.

Also, baked into this prognosis is the idea that the trillions and trillions of printed money injected into the global economy by central banks in a zero rate economy will not have any more negative repercussions than they did after the 2008 crisis (where the Fed had the luxury of 6 percent interest rates).

I have to believe most people buy into that.  And if that's true, the $1700 price tag on gold seems pretty reasonable,

However, if any part of those assumptions are wrong gold goes much higher.  For example, if as most scientists agree, there will be no vaccine for about 18 months, then any attempt to "return to normalcy" in an environment where there is little to no testing is a pipe dream.  What if we have rolling outbreaks that keep interrupting "normalcy?"  This is sure to frighten people

Then gold goes higher.

Also, what if mass unemployment and  business failures destroy any idea of "Pent up demand?"
What if people decide it best to SAVE MONEY rather than live pay check to pay check?  In this case positive growth disappears as 70% of the economy is consumer spending, in an economy where trend was already below 2 percent.

Then gold goes much higher.

Now, what if injecting trillions and trillions of printed dollars into a debt soaked economy running on zero interest rates does have some negative financial repercussion?  What is we see a wave of credit defaults that roil the banking system and require a new round of bailouts?  The banks claim to have rock solid balance sheets.  But the three larges US Banks have combined 3 trillion dollars of off balance sheet trading liabilities/  What if we have a series of new financial crises?

Well then gold goes much much higher.

So how do you value gold?  It depends how you handicap the likelihood of the future conditions outlined above.