“The gold price will eventually have lots and lots of zeros after it”

Gold futures closed modestly lower at the COMEX on Monday, with the August contract settling down by $5.40, or 0.3%, at $1,577.40 per ounce.  The yellow metal fell to an intra-day low of $1,562.00 this morning, but recouped the majority of its decline as the U.S. Dollar Index gave up over half of its gain to trade higher by just 0.2% at 83.77 this afternoon.

Although gold prices have continued to hover recently near the lower end of their range for 2012, the longer-term prospects for the yellow metal remains quite favorable, according to Egon von Greyerz.

In his latest interview with King World News, von Greyerz – the Founder and Managing Partner of Matterhorn Asset Management AG – laid out his extremely bullish case for gold in light of recent financial developments across the globe.

“The world is simply drowning in debt,” von Greyerz asserted. “This is why it is guaranteed that governments will print money…Spanish rates have broken back above the 7% level once again, but in reality we know that many European countries will never be able to repay these debts.  You now have a total worldwide debt of around $150 trillion.  If you add to that contingent liabilities, unfunded liabilities, pension funds, etc., you are talking about $500 trillion.”

Von Greyerz added that “If you add to that the outstanding derivatives, which are around one quadrillion dollars, and there are no reserves for them.  These are issued without any real asset backing them.  If you combine the two figures you are at a staggering one and a half quadrillion dollars.  That’s against world GDP which is around $50 trillion.”

“So the money printing will come and the hyperinflation will come because without that we have no banking system and no financial system left,” he continued. ” You are talking about hundreds of trillions of dollars that potentially need to be printed.  The effect of this on the global economy will be disastrous.”

As for specific targets for gold, von Greyerz stated that “Prices of hard assets will go into the stratosphere, and this, of course, includes gold and silver.  Last time we talked about my target on gold of $3,500 to $5,000 over the next 12 to 18 months, and then over $10,000 in 3 years.  But with all of the money creation we are talking about, the world will experience massive inflation.  We already know that gold went from 100 marks to 100 trillion marks, from 1919 to 1923, during the Weimar Republic.”

He went on to say that “With world debt at much greater levels today vs that time period, the gold price will eventually have lots and lots of zeros after it.  But people who are still holding paper money may very well find it is worthless.  At least gold will protect your purchasing power.”

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