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11/23/2011
Ramblings

I think we are getting close to a run on gold, and here's why. First of all, all of the gold that has ever been mined will fit into two olympic sized swimming pools. The first pool (1/2 of all gold) is jewelry. The second pool is 1/2 owned by all governments, ETFs, and the billionaires & multi-millionaries in the world. Most of this gold is not for sale as physical gold. Another 10% was used for Industrial and not available. The leaves about 1/8 of all of the physical gold for the rest of us. And its not much.

Of the 1/8 that is available for the rest of us, I would say about 1/2 of it will not be for sale. So that leaves 1/16 (ballpark guess) of all of the gold for the rest of us to try to accumulate.

This is why the potential for an explosive price appreciation is not only possible, but likely. A time is quickly approaching when physical gold will be VERY difficult to find. It's simply the law of numbers. When 100 million or 300 million people are scrounging for physical gold, most of it is going to be gone very quickly. Call it a run on gold, and it very well could happen.

Now, this might not happen if the global financial system can keep from imploding, but it is not looking good. The wild card for me is the bond market. It is so huge (when you factor in the derivatives), that it won't take much for a meltdown. Once a meltdown begins, that 1/16 of gold ($8 Trillion x 1/16 = $500 billion) is going to dry up pretty quickly. I'm probably being too optimistic. The billionaries and multi-millionaires will probably take much more of the available gold. What physical gold will be left for the rest of us will probably be closer to $250 billion, which is pocket change when you add up the global population.

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