07.12.2022 – An outrageous thesis from Switzerland: Star analyst Zoltan Pozsar from Credit Suisse believes that a gold price of 3,600 dollars is possible. And that, in his opinion, has to do with petroleum.
The expert, who believes that commodities will dictate the new world order in the future, draws a wide arc from oil to gold, which you can see here in the daily chart.
Source: Bernstein Bank GmbH
For example, Pozsar wonders what will happen once the U.S. has siphoned off its Strategic Petroleum Reserve (SPR). Specifically, “Now that SPR releases are over, production cuts by OPEC+, re-routing [of Russian crude oil from Europe to Asia], and price caps (not to mention the risk of China re-opening due to protests), the question for the U.S., becomes what to do with the SPR?” he says. Release more? Refill?”
U.S. oil reserve depleted
In fact, the SPR has reached its lowest level since 1984. The U.S. government had tapped the reserves to fight inflation. In September, U.S. President Joe Biden had announced that the reserve would be replenished once oil prices fell below $80. In October, the White House lowered the advised purchase price – now it said it would be replenished at a price of $67 to $72 per barrel of WTI. Pozsar considers this target unrealistic, as OPEC+ has not expanded its capacity.
Then the expert pointed to the factor of Russia – the country already sells its oil at a discount of 30 dollars to Brent. Russia, he said, was thus selling at $60 – about the price of a gram of gold.
Russia’s possible gold move
Since Moscow has no interest in India, for example, buying oil cheaply in Russia and then selling it on to the U.S. at a high price in order to fill the SPR salt domes on the U.S. Gulf Coast, Russia could come up with the idea of having its oil paid for in gold in the future.
If Russia then countered the West’s price cap with a loss-leader offer, it would become interesting for gold. Specifically: “But if the West is looking for a bargain, Russia can give one the West can’t refuse: ‘a gram for more’. If Russia countered the price peg of $60 with offering two barrels of oil at the peg for a gram of gold, gold prices double.”
A win-win situation for Russia: “And most important, gold going from $1,800 to close to $3,600 would increase the value of Russia’s gold reserves and its gold output at home and in a range of countries in Africa. Crazy? Yes. Improbable? No.”
The analyst’s conclusion from all this is that a link of oil and gold would bring back the precious metal as a settlement medium and dramatically increase its intrinsic value. We are curious to see if this price link will actually happen – and wish successful trades and investments!
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