Jul 4, 2011

Erste Bank Gold Report

Erste Group Bank's new report on gold as an investment and currency, written by Ronald-Peter Stoeferle and published today, may be the most comprehensive and profound of its type. Its major conclusions include:
  • Negative real interest rates are the main driver of the gold price and will continue to be powerfully supportive.
  •  The arguments supporting a return to some form of gold standard are strengthening.
  • Government debt burdens could be sustantially eased by a higher gold price.
  • There is no "bubble" in gold, as the public is hardly invested in it and has little interest in it.
  • Increasing dependence on government transfer payments for the public's income works against restoring solvency to government.
  • Many paper pledges of gold cannot be fulfilled by real metal, a point credited to GATA.
The report concludes, in part:

"Given that the majority of debt has neither been written off nor paid off but simply transferred, the problem of excessive debt is still waiting to be resolved. There has been no deleveraging, only an adjustment of booking entries from the private to the public sector. The quantitative easing has left monetary stability short on credibility, and it will be very difficult to remedy this situation. In this fragile environment gold will continue to thrive."

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