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Gold Price - Where is it heading?

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I thought it worthwhile to compare yesterdays trades in BTCUSD Bitcoin in $USD and XAUUSD Gold in $USD and GLL Proshares Ultrashort ETF in $USD









As one would expect there is an inverse correlation between Gold and GLL, the latter is a geared short traded on the NYSE. Gold lost 4% over the day and GLL gained 3.4%. This reasonable given fees. Care needs to be taken with holding GLL for longer than 1 day as losses and gains are magnified and it often plays catch up with the POG via the Bloomberg Gold Sub-index. Given its gearing these can be large and it has mostly provided negative returns to investors.

Bitcoin initially rose as gold fell but then lost momentum to finish little changed by the end of normal days trading. Having looked at the charts below carefully it makes me humble in attempting to predict prices of gold in to the future and also other entities reactions to a change in the POG.

gg
 

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Sean K said:
Would be interested in opinion on this @ducati916 You've been writing quite a bit on the US monetising gold or revaluing it as a means to clear debt. I'm not sure how or why the US is valuing it's gold at $42 an ounce, sounds a bit off.
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As the evidence mounts for a revaluation and gold continues to rise in anticipation of that revaluation.

So if gold were officially revalued to $3000 which will be the market price in short order, what happens to the free market price?

It moves higher.

Why?

Because gold is gold. What has happened is that you have just devalued fiat currencies generally and the USD specifically. The market price with the USD valued at current valuations, ie. $42oz is a very different valuation if the official price revalues to $3000oz

jog on
duc
 
dump ? or profit-take on winning options and futures contracts

there would be only a few players loading up on negative bets on gold ( and Central Banks would be among them ... short the contracts to take delivery cheaper ).

now the forgotten ( or ignored ) elephant in the room is .... Basel IV , it looks like the US and other laggards are going to be fully Basel III compliant by the end of the year .... will they start pushing for Basel IV compliance across the globe ?
 
now another reason that comes to mind is

a major liquidity event where a ( or more ) debt-stressed entity is forced to sell ( or crystallize profits ) to satisfy debt repayment demands

BUT if that was a really big player , i would have expected a bigger down ( and of course that seller/s might continue that on Monday )
 
Quite a few people had shorts on gold, watched them all joke about it on the Traidview chat last night. Possible US brokers going by the banter.

There'll be some bargain gold miners coming up next week I would say.

With Trump being so unstable I would expect the POG to go back up again sooner or later.
 
most of the gold producers , that i am interested in , are still way above my target prices

the exceptions are two mixed resource miners that mine SOME gold but are considered as miners of other metals .. namely AIS and ZIM
 
How a gold revaluation works


The U.S. Treasury can draw up to $700 billion in new funding from its gold revaluation account at the Federal Reserve. And the Treasury could invest this “new money” in a sovereign wealth fund (increasing the money supply by an equal amount).

Using its gold revaluation account would emphasize gold’s strength versus the dollar, something the United States government has been trying to downplay for decades. This turn of events would be bullish for gold and weaken the dollar.

Introduction​

I started writing about central bank gold revaluation accounts (GRAs) to show how they can use a trick to write-off assets, such as government bonds from their balance sheet with new money from their GRAs. The German central bank even wrote me in an email that it doesn’t rule out this possibility for the future.

Then I discovered how central banks have been using their GRAs to absorb losses, like the Central Bank of Curaçao and Saint Martin (CBCS) did in 2021. Coincidentally, as interest rates went up in 2022 and central banks globally experienced shortfalls, officials from the Dutch and German central banks commented that their massive GRAs underline the soundness of their balance sheets. Providing a solvency backstop, if you will.

Because of how modern central bank balance sheets are structured, GRAs can also be used to fund their respective Treasuries. Even the World Bank noted my writings, as it referenced my research on GRAs in a handbook for asset managers on why to invest in gold.

What Is a Gold Revaluation Account, and How Can It Be Used?​

A gold revaluation account (GRA) is an accounting item on the liability side of a central bank balance sheet that records unrealized gains of gold assets.

When the price of gold denominated in fiat currency rises, as it inevitably does in the long run, gold assets increase in value, and concurrently, the GRA swells.

As a formula:

GRA = present gold market value – gold purchasing cost

​
In this example, central bank X once bought gold for $300, and the present value of that gold has gone up to $1,500, creating a GRA of $1,200. Capital and the Gold Revaluation Account is the central bank’s equity.
In many textbooks you will read GRAs are meant to cushion a decline in the price of gold, but because gold is scarce and the denominator (fiat) on central banks’ balance sheets is not—visible in large GRAs of banks that own gold for a long time—there are far more creative possibilities for it.

In the example below, I have illustrated that a central bank can transfer entries from its GRA to its own capital position and absorb losses (+200); to the government’s checking account held at the central bank (+100); or to write-off assets (-500).

It’s just numbers.

​
If central bank X draws $800 from its GRA, there is still (1200 – 800) $400 left to cushion a potential decline in the price of gold.

The American Setup​

Take notice that the central bank of the United States owns not one ounce of gold. With the Gold Reserve Act of 1934, the Federal Reserve transferred all its monetary gold to the Treasury in return for a special series of gold certificates valued at $35 an ounce. These gold certificates are purely an accounting item and can’t be redeemed for gold.

Because the U.S. has always been reluctant to raise the statutory price of the gold in its books to downplay the strength of gold versus the dollar, the Fed’s gold certificates today are still valued at 42.22 dollars an ounce, a price approved by Congress during the demise of Bretton Woods in the early 1970s.

On February 3, 2025, President Trump signed an executive order for the creation of a sovereign wealth fund within one year. Standing next to him when he signed the order was Treasury Secretary Scott Bessent, who told reporters, "We're going to monetize the asset side of the U.S. balance sheet for the American people."

What asset can that be? He could be referring to selling off federal lands or vacant government office buildings, but the Financial Times speculated on February 7 that it’s a reference to gold:

Perhaps the Trump administration does want to draw on the Treasury’s gold revaluation account at the Fed, as happened in 1972 when the official gold price was raised from $35 to $38, and in 1973 from $38 to $42.22 an ounce.

Doing so would allow the Treasury to spend hundreds of billions of dollars without increasing the national debt.

Step one would be for Congress to approve an increase in the official price of gold. Step two is for the Treasury to issue new gold certificates for the Federal Reserve.

Once the value of the Fed’s gold certificates on its balance sheet goes up, the Treasury’s checking account at the Fed, commonly referred to as the Treasury General Account (TGA), increases by the same amount.

As the Fed doesn’t own any gold, a windfall from the revaluation of its gold certificates is for the owner of the physical gold, which is the Treasury. Note that when GRAs are used for spending, it creates new money and thus has to be done through central banks. Welcome to the wonderful world of accounting!

The below illustration is from a paper by Albert E. Burger, published by the Federal Reserve Bank of St. Louis in 1974: “The Monetary Economics of Gold.” When, in 1972, the statutory price of gold was revalued to $38 from $35 an ounce, the TGA increased by roughly $800 million.

​
H/t John Paul Koning. The same procedure is described in the Financial Accounting Manual for Federal Reserve Banks, published in April 2024 (page 12).
From A. E. Burger:

Following the revaluation of the U.S. monetary gold in 1972, the Treasury spent $800 million at the private sector—without selling an ounce of gold—increasing the monetary base (reserves) and broad money supply (deposits) by an equal amount.

How Much Can Trump Spend?​

Currently, the Treasury owns 8,133 tonnes of gold valued at $42.22 an ounce, which equals $11 billion, while the prevailing market value of the gold is roughly $750 billion.

Treasury can deplete its gold revaluation account via the Fed in full but then runs the risk that the free market price of gold falls below the new U.S. statutory price, which would undercollateralize America’s balance sheet.

So, either Trump draws less than $750 billion from this trick, or he takes it all and puts a floor under the free market price of gold, which brings us one step closer to a gold standard. This, of course, would be bullish for gold as its role in the system would be promoted to the highest tier once again.

The Federal Reserve could counter the Treasury’s expansion of the monetary base by selling bonds, but this would drive up interest rates, which is not what Trump wants. Trump, firmly in charge since in office, is thought to want a weaker dollar to boost exports.

Expanding the monetary base by drawing on the United States’ GRA would do just that and allow him to invest in a sovereign fund. Two birds with one stone.


jog on
duc
 
Leave me thinking about the effect on silver.
I know this is the gold thread but yet deeply relevant.
If gold goes even higher with a reevaluation, silver should follow yet a higher silver price would destroy the industrial use of silver, becoming too dear.
Limiting the silver increase....
Would not that gold scenario actually break the relationship between silver and gold price,?
 
qldfrog said:
... yet a higher silver price would destroy the industrial use of silver, becoming too dear
Click to expand...
The use of silver industrially has often been referred to as 'inelastic' to the price. That is, it is so superior to alternatives and as a component such a relatively small percentage of the total cost in most applications that it could be a multiple of its current price and still be in demand. Plus you could argue that a higher price would paradoxically attract more lnvestment demand to take up any posited slack in industrial demand.
(from my unpublished thesis dissertation: ibid: preface p3 'Hiho Silver' Monash Economics phd candidate: finicky: pres 1971)
 


I respect the opinions of you both but re Silver there appears to be some divergence on fact. I know nothing more than the average taxi driver about silver, I do know that punting on the stock SVL is a good way to lose money and when in doubt I go to Investopedia.

This is quite a good article on this PM and was updated just 4 months. ago.

Silver: What It Is, How It Works, and History

Silver is an element commonly used in jewelry, coins, electronics, and photography; thus, it is seen as a highly valuable substance.
www.investopedia.com

gg
 

Think about this. Gold is an absolutely brilliant material for industrial uses. It is extremely corrosion resistant. This is one of, probably the main reason it is so coveted, the reason it become so exalted that it is the winning medal at the Olympics, we have the term 'gold standard' to refer to the best available option for something, etc. Being corrosion resistant meant deposits of gold could sit around for literally billions of years and be found by humans in a metallic state. This was amazing and useful to early humans who started using it as currency and for various other applications, and with those properties it was amazing for everything from false teeth to the smallest scale electronics (no corrosion means you can have electronics as small as you want, as opposed to other metals where a tiny amount of corrosion destroys a tiny component). It has various other fantastic properties from protective coatings to... well, I could rave on and on...

The point is, being so loved and cherished because of its amazingly useful properties, people coveted it so much that they wanted to own it as an investment rather than practical material. Believe it or not, it primarily started being used as stores of wealth in bars, held idle, stacked in vaults and heavily-guarded warehouses. As its monetary value outstripped its practical commodity value, humans started using alternatives for practical applications, even though gold was a superior material and was being held inert and unused in vaults. The behaviour of the humans in the 20th and 21st centuries truly is insane and as of the current time the insanity is rapidly growing.

You may or may not find this story relevant to your attention on silver, a precious metal which has been seen for thousands of years as synonymous with monetary currency, having a monetary value which is exceeding some of its practical applications.
 
ducati916 said:
Expanding the monetary base by drawing on the United States’ GRA would do just that and allow him to invest in a sovereign fund. Two birds with one stone.
Click to expand...
invest it WHERE ?

surely not the great debt pig . The Treasury

would Trump have the foresight to invest in a profit-making infrastructure project(s) something along the lines of the Australian Snowy River Hydro

i don't like any of this money recycling/laundering scheme ( i have seen human weakness wreck good ideas before ) but MAYBE Trump can be the exception , especially if he lays the foundations for 8 years of a Vance Presidency .

but i don't even get to vote in the US let alone buy Congress members

i will stick to investing in India where Modi understands he is threading the needle between a bullet in the head and a full-on military coup
 
that assumes silver production would be static despite higher prices ( as if rising production costs aren't a big enough anchor )

a rise in the price of silver would inspire more production ( in the mid-term while inflation works it's black magic on spending power of those dollars

industry MIGHT be pushed into being more efficient in both gold and silver consumption ( say creating a useful silver alloy )

until we see a surge in gold toilet bowls and tap handles , i doubt commercial gold consumption will rise much ( outside of data centre use ) MAYBE to gold/silver ratio will head towards more normal numbers

BTW all this gold revaluation scheme assumes the bankers won't create another deluge of derivative bets ( secretly ) on the collateral gold holdings
 
There's no 'might' or maybe about it. Higher prices cause industry to be more efficient with gold and silver use or abandon it entirely for alternatives. We've already seen that, especially with gold since gold has long had its value sit massively above commodity value, and silver is going the same way.

This principle is just an innate concept which will work anywhere with anything. If one application for a commodity gives it a higher value, that commodity will no longer be used if a cheaper alternative can be found. This works whether aluminium can be used instead of silver in electronics and while not as good it's good enough to justify the savings, and the silver is instead used in other areas of electronics which are higher value, or when it is removed from an application for the same principle with because the alternative application is having it used in an entirely different industry, even if that industry is wealth storage.

Silver is not essential for much at all, it's just the best available option for a lot of things, and if it gets priced out of the system, alternatives can be used. Gold demonstrates this concept beautifully. Diamonds are an even more insane example. Diamonds are very useful as cutting tools and some other applications, but mostly are used as... people think they are mostly used as trinkets but mostly they are held in vaults or dumped off the continental shelf to increase their market value.

The fact that I could use gold, silver or diamonds as paperweights or basic electrical cables worth a trivial amount of money doesn't mean their value is pinned to their value in those applications. The value of any commodity relates to whatever the value is in the perception of people who want to use it in whatever its highest value application is which can consume supply. The existence of a lower value application is irrelevant, it just means it can't be used for that application.

It's strange that this concept doesn't seem to have sunk into the mind of the market in the context of silver, and when it does as it inevitably will whether this year, next decade or next century, it'll undergo a rerate. Unless the world wakes up and starts using everything as commodities and abandons the concept of using intrinsically valuable commodities as inanimate wealth tokens, but unless we nuke ourselves back to the stone age I can't see that happening in any of our lifetimes.
 
Sdajii said:
but unless we nuke ourselves back to the stone age I can't see that happening in any of our lifetimes.
Click to expand...
you can't discount that possibility ( but more likely with biological or chemical weapons ) we are breeding a special kind of stupid

the logic for biological and/or chemical weapons IS , the aggressor is normally after food , mineral and energy resources to pillage , the increased radioactivity in nuked areas would deter extraction by humans and the robotics aren't up to speed yet in those areas ( to be autonomous )
 
I've been to Hiroshima. It's a thriving and quite lovely city. No one is concerned about radiation there. The big blast was an issue though.

It's getting a bit off topic, but when I said 'nuke ourselves back to the stone age' I meant it as a generic way of saying cause any form of catastrophe which destroys modern civilisation and sends us back to a day to day working for survival existence (our natural state and a healthier one incidentally). There are plenty of ways it could happen but I think actual nuclear bombs are perhaps most likely. Chemical weapons aren't likely to reset the world, biological weapons are unlikely to be used in a way which would send us back to the stone age (the Chinese are working on highly deadly viruses which target specific races, but how reliable that specificity would be and how likely it would be to mutate and impact everyone is another story... though they have already had several lab escapes, so hey, it could accidentally happy... but the inherent problem with a bioweapon is that if it kills your enemy it is also a threat to your own people and they are inherently difficult to control) and nukes remain the big, obvious 'we're losing or in a desperate situation so we're going to blast you hard right now' option.

Either way, if we are reset by any method to a survivalist style of life, value comes down to the intrinsic value of any commodity rather than absurd artificial value as in gold, crypto, FIAT, NFTs or other nonsense.

And 'nuking ourselves back to the stoneage' is certainly a very real possibility (as is completely wiping ourselves out of existence), while at least in our lifetimes, waking up and valuing everything properly is not a realistic possibility.
 
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