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XMFSinchiruna (26.50)

Citigroup says Gold is going to $2,000 next year ... Got Gold?



December 01, 2008 – Comments (7)

Did you ever think you'd see predictions of civil unrest and warfare from a mainstream financial corporation like Citigroup? That's some food for thought! Got gold?


The bank said the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

"They are throwing the kitchen sink at this," said Tom Fitzpatrick, the bank's chief technical strategist.

"The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

"Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes," he said.



7 Comments – Post Your Own

#1) On December 01, 2008 at 1:04 PM, zzlangerhans (99.70) wrote:

Ha ha! What does Citigroup say Citigroup is going to next year?

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#2) On December 01, 2008 at 1:26 PM, GorillaGorilla (< 20) wrote:

The intersting thing at the moment is the strengthenting of the US dollar. I was having a discussion about exchange rates with someone and, to cut a long story short, we didn't know which currency to move to next.

 Australia, New Zealand economies are wating on the Chinese. Europe is lagging US but assuming that Europe isn't going to tank then Euro possible. UK pound... economy as bad as US..Swiss franc no, sorry. Wasn't anything obvious left. 

 So, if/when  inflation kicks in and US dollar starts to topple then the choice for cash is stark 1) Equity 2) Gold.....

 I was looking at Gold today (GLD) interestingly it went down along with equities! Perhaps the end of the world is really nigh :)



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#3) On December 01, 2008 at 3:15 PM, cmfhousel (89.18) wrote:

I tend to agree with zzlangerhans. You discredited Charlie Munger's theory of deflation I sent to you with a hesitation towards "expert" opinion, but now you seem to insinuate that Citigroup's chief technical officer -- of all people -- can see the future. :) 

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#4) On December 01, 2008 at 4:05 PM, XMFSinchiruna (26.50) wrote:



If memory serves, all I said about expert opinion in that context was that the dissolution of so many prior assumptions and tenets of the financial system requires a fresh round of scrutiny that renders many well-informed Fools as qualified as the Charlie Mungers and Tom Fitzpatricks of the world to correctly assess where this is all heading.

Anyway, by pointing out what the analyst stated, I am not attributing any greater credibility to this guy than to anyone else ... I just found it poignant to see a mainstream financial source even mentioning a chance of civil unrest and warfare as potential scenarios ... without commenting on my own perception of the likelihood thereof. :) A sign of the times, if you will.

But I did agree with the guy's general expectation that whichever way this turns, it will do so with gusto. After this $8.6 trillion experiment, we're not about to have a gradual transition into anything ... we're about to slam into one reality or another, IMO.

I've been calling for $2,000 gold as a long-term target for more than a couple of years now. I have a long list of industry 'experts' who have named similar targets, and while I will apportion no undue credibility to any one of them, I believe that the more such assessments come to light, the greater the case for their collective veracity. By contrast, I've encountered only a small handful of claims that gold is going lower or only slightly higher going forward.

I combine the sum of all such assessments with my own ongoing analysis of the underlying fundamentals for gold on a continual basis, and base my conclusions upon a preponderance of the evidence available, and in my humble opinion a preponderance of the evidence suggests gold will go substantially higher, with $2,000 representing a reasonably likely target. The central tenets of my hypothesis are always open for debate, even though more and more it appears as though inflationists and deflationists are hopelessly at odds with some of their underlying assumptions...  assumptions which in truth have never been tested under precisely these conditions.

Perhaps we're all just lower-case fools who are in no position to claim any reasonable chance of predicting the general course of our economy or markets going forward ... after all .. these are wholly unprecedented conditions which suggests an element of guessing must be admitted to be involved in any prediction by any individual. The future is never certain, and least of all today.

That being said, each of us can only proceed with our own individual assessments of the situation in real time as we seek to invest accordingly. Whether inflation or deflation wins the day, I am comfortable with my choice of remaining heavily exposed to gold and silver.

In case I neglect to state it sufficiently often, just because I constantly post material on my blog that is supportive of my views regarding gold and silver, I seek to do so with humility and without any claim to have a monopoly on truth. I love to debate as often as time permits, which is precisely why Motley Fool CAPS is the perfect place for me. :)




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#5) On December 01, 2008 at 5:55 PM, Gingerbreadman55 (27.36) wrote:

Well said Sinch.

"After this $8.6 trillion experiment, we're not about to have a gradual transition into anything ... we're about to slam into one reality or another, IMO."

Great line, btw.

I also have to smile that a mainstream analysis is caving in to the (conservative) $2000 target for gold. Its probably one of the lowest risk assessments ever, mostly because of the dizzying array of scenarios that lead to it.

8.6 trillion dollar wall of inflation...

U.S. losses AAA credit rating and/or other nations stop buying our debt... 

Americans lose confidence in the financial system and get out of banks...

Oil ceases to be traded in dollars...

Nations begin buying it up to support their financial system *cough*China*cough*

Gold has proven it can hold the $700-$800 floor that just 5 years ago was a long forgotten ceiling. If even the massive call for deflation can't knock down the price then there is little room for it to drop farther.

With large upside potential, low risk (zero risk if you factor in the fact that it will ALWAYS be worth SOMETHING) and protection from total failure, I say yes to gold.

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#6) On December 24, 2008 at 10:12 AM, thehammer01 (93.96) wrote:

If you have been calling for $2,000 gold for a couple of years and it has not reached it yet, isn't that considered a horrible prediction? 

It's akin to someone calling for gallons of milk to go to $10.  It is bound to happen, but if it doesn't reach there in the next 1-2 years then it is a pretty bad call. 

You will counter with a refined definition of a "long term" prediction, but really?  You're telling me that if I invest in gold at $800 and it goes up to $2000 in the "long term" (anything greater than 4-5 years) that it is a good enough investment to  deserve a headline?  In which case, you are doing a diservice to the relative quality of your predictions/posts.

Not that I agree with your gold prediction, but if you wanted to make a quality arguement you should have included some analysis by the more famous goldbugs Peter Schiff or John Williams (Shadowstats).

Keep 'stabbing', but the readers are waning and may not come back...  I'm also not sure I would trust a TMF whose score is <20.  Aren't you people supposed to do this as part of your living?  If the NFL is making money and still cutting 10% of its workforce, I would think with those scores that you might include a little more research in your posts.

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#7) On December 30, 2008 at 10:53 PM, XMFSinchiruna (26.50) wrote:


In a year that made countless experts' projections look foolish, I stood by the only asset class which will end the year with a gain. I have never tried to guess the precise timing of a $2,000 target for gold; and suggest that you draw your own conclusions about whether you wish to invest. By the way... the difference between milk and gold is that gold doesn't sour. :P

Given the severity of the economic challenges ahead, then most emphatically yes I believe an asset with a chance to gain 150% is a winning proposition. Surely you don't think the S&P500 will be reaching the 2,000 mark anytime soon.

If you were familiar with my blog, you would see that I have posted ample material from the likes of Schiff and other sources which I can only presume would meet with your greater approval. Frankly, though, I have accrued a fair level of expertise on the subject myself over the past several years, which you seem to dismiss quite readily.

As for CAPS scores, you'll note that my alternate CAPS profile, with a rating of 99.65, is in fact outperforming your own after only 6 weeks since inception.

If you'd like to present some reasoned argument for why you think $2,000 gold is out of the question, I would be happy to engage in a friendly debate. If all you wish to do is disparage me, though, I'm certainly not interested.

Happy New Year

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