In their May letter, Paul Brodsky and Lee Quaintance of QB Asset Management in New York argue that the investment case for gold is to a great extent a matter of its likely official revaluation upward to support confidence-based currencies that have lost the market’s confidence.
As improbable as it may seem lately, what with the constant suppression of gold and silver prices on the futures markets, Brodsky and Quaintance conclude that central banks now really mean to push the gold price up — way up — once the gold necessary for the plan has been obtained and redistributed among central banks. Brodsky and Quaintance write:
“The key to a successful transition is a credible monetary reset. Gold is the default collateral for money because it has a long and established precedent in this role. All that would be needed would be a fairly equitable distribution of gold among global monetary authorities (taking place now?), and an agreed-upon exchange rate vis-a-vis baseless paper. It would have to be an exchange rate at which central banks could successfully monetize assets by tendering for physical gold with newly manufactured paper money, an exchange rate high enough to attract enough gold to cover unreserved credit held in the banking system. It’s a high figure.
“The relative cost of holding physical gold today is minimal, (above-ground bullion or in-ground bullion through mining shares), against the negative real returns offered by the preponderance of financial assets in float. We suggest one keep identities straight; invest with central banks, not against them; and consider the hollow rhetoric of the establishment that may temporarily suppress its paper price a ‘gift.’ They are working for physical gold holders, not against them.”
Brodsky and Quaintance have kindly allowed GATA to post their letter here:
http://www.gata.org/files/QBAMCO-May2012.pdf
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