Federal Reserve Balance Sheet to $40 Trillion

We start this week with some highlights from a current billionaire bond king, Scott Minerd recorded this past Monday, October 19th, 2020. In an hour-long discussion courtesy of bond and investment house Guggenheim Partners, entitled, "The Long Road to Recovery".

Last week if you recall we touched on the coming further growth of the Federal Reserve balance sheet.

You might recall this chart, how the Federal Reserve's ballooning balance sheet is correlated with a rising gold price.

IMAGE - Gold price Fed balance sheet SD Bullion

Have a listen to this just over a 2-minute discussion, published last week on October 15, 2020, between financial experts Grant Willians, Bill Fleckenstein, and Felix Zulauf from episode 9 of "The End Game" podcast (excerpt from minutes 31 into minute 33).

These recent comments by billion-dollar asset manager Felix Zulauf essentially 6 to 7 multiple the current Federal Reserve's balance sheet which is at just over a $7 trillion fiat Fed note level currently. Go take another gander at the chart above and think how the world looks when it five folds or more.

If Felix's prognostication proves accurate, and if this current correlation holds up, that is how we could find a gold price range above five-figure, over $10,000 fiat Federal Reserve notes per troy ounce by the close of this 2020s decade.

This all may sound ridiculous but if we study the current case of Japan who now has nearly 3Xs the debt to GDP levels, perhaps there is way more room for the Fed's balance sheet to expand ahead. 

Let's hear a bit more about turning Japanese from billionaire bond king, Scott Minerd.

Where the endgame of all this perhaps leads to (hint, hint - a return to gold).

IMAGE - gold reserves G8 nations China Switzerland SD Bullion

It is perhaps timely that Santiago Capital recently updated its G8 plus China and Switzerland’s fiat currency M0 M1 M2 piles vs their official gold bullion reserves data column. Especially given the recent viral crisis fiat currency creation explosions headed higher this year.

The final third column gives a current gold price in fiat Fed Notes to back the local fiat currency supply 100% by the nation's official Gold Reserves.

The only suggestion I add here is to do this calculation by 40% given historic precedent of how major structural changes in monetary regimes tend to hit that level more often historically especially in US financial history.

IMAGE - Gold revaluation US History monetary base vs official gold reserves SD Bullion

Another interesting point on this current gold vs local fiat M0 pile is that the Russian Federation has pretty much got its official gold bullion reserves position established now. Given recent reports, it appears now that gold bullion is starting to flow to the Russian banks for private client investments in gold bullion.

Already the Russian Federation only requires a fiat Federal Reserve note price of $2,097 oz gold for their M0 fiat rubble pile to be theoretically 100% back by Official Russian Gold Reserves.

Turning to silver news from this past week. 

IMAGE - Citi silver $40 oz note for the year 2021 and beyond to $50 and even $100 oz silver future SD Bullion

Citi bank calls for a $40 oz silver price within the 12 months as robust investment demand continues and industrial demand rebounds.

The harder question for Citibank to answer is at what price the silver spot price will pass the stock price of $Citi perhaps also occurring with 12 months of time.

This story posted on Forbes, went further with coverage from this week's analyst note stating,

"Citi, which has a well-connected resources research team, has put its neck on the silver block in an advisory note with a tip that the price of the metal will rise to $40 an ounce over the next 12-months.

Silver is currently trading around $24.80 an ounce on the London bullion market, having already risen by 38% from $18/oz since the start of the year.

Citi's case for silver is based on growing demand from investors who see silver as a cheap entry point into the world of precious metals dominated by gold, with a bonus of strong industrial demand.

But the bank doesn't stop at a 605% silver rally. It also argues that there is a technical case for silver doubling $50/oz, and potentially rising four-fold to $100/oz. The bank said its foreign exchange (FX) technical team is very bullish on silver with "$50/oz a very realistic target -- and $100/oz possible."

In summation, the coming year 2021 and the 2020s decade remains squarely bullish for precious metal beta bets. 

We suggest moving quickly in establishing your bullion positions. 

That is all for this week. 

Thank you for coming by, and as always, take care of yourselves and those you love.

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...