- Because gold is held by many central banks, once as a reserve currency but now as an inventory currency, it functions as a swing asset to balance the International Balance sheet of the US.
- Central banks are sellers of dollars but still hold, by default, large dollar inventories.
- China has hedged its dollar position 50% through commitments to long term dollar commercial agreements, pay in, mineral, and energy deals internationally. That is an act of pure genius.
- We can assume other central banks still hold 90% of their reported dollar positions, on average unhedged by commercial obligation positions.
- In crisis times, the US dollar price of gold ALWAYS seeks to balance the International Balance Sheet of the USA.
- Therefore: Take 90% of international US dollar debt less China and then add 50% of the US debt owned by China. Then divide that number by the ounces supposed to be owned by the US Treasury. The result is where gold wants to go.
- In 1974 this gave me $900 gold.
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