November 20, 2014
Since 1999 the gold price has moved in concert with the growth in the U.S. Federal 
Reserve Balance Sheet including the recent correction in both during the past three years. Accordingly, the following objective analysis forecasts the gold price out to 2016 based solely on historical Central Bank data.
The above introductory comments are edited excerpts from an article* by Vronsky (gold-eagle.com) entitled Gold Price Forecast Per US Federal Reserve Balance Sheet.
Vronsky goes on to say in further edited excerpts:
The chart below estimates two balance sheet growth rates from 2012-2016 (when Obama leaves the Presidency):
- Adding $40 Billion per month…equating to a Compound Annual Growth Rate (CAGR) = 14.8%
- Adding $85 Billion per month…equating to a Compound Annual Growth Rate (CAGR) = 26.6%
Steady Balance Sheet Increases of Major International Central Banks
Moreover, it’s noteworthy that the balance sheets of major international central banks have likewise been growing in tandem since the beginning of the millennium.
The chart below clearly shows steady balance sheet increases in the Euro Central Bank, Bank of Japan, Bank of England and the US Federal Reserve.
Accelerated Growth of the Fed’s Balance Sheet Since 2008
Likewise, internationally acclaimed market analyst Adam Hamilton observes: “ The chart below shows the Fed’s balance sheet accelerated growth since 2008 when QE was initially born. This data is stacked withinthe Fed’s total balance sheet (orange), with US Treasuries (red) sitting on top of mortgage-backed securities (yellow).”
[As can be seen in]…Hamilton’s detailed chart above, the increase in the Fed’s balance sheet has been dramatic during the past seven years and, despite the fact the Republicans now hold a majority in both houses, it is hard to imagine that the Fed’s balance sheet will not continue to expand during President Obama’s last two years in the White House – and such would translate into a higher price for the shiny yellow well into 2016.
Many factors can affect the gold value up or down…[such as]:
- The possibility of a recession in the U.S..
- The probability the Euro Union will implode, thus trashing the value of the Euro currency.
- Russia’s Putin sparks World War III over the growing turmoil in the Ukraine.
- Inflation and interest rates might soar as they did in the late 1970s under President Jimmy Carter, when gold price soared +507% ($140-$850) from 1977 to 1981 (a CAGR = 56.9%).
- Other countries may follow Switzerland’s lead in voting to establish a Gold Standard.
- Peoples Bank of China accelerates its covert objective to replace the US$ with the Renminbi as the world’s reserve currency.
Projected Gold Prices Per US Federal Reserve Balance Sheet Projected Growth
Obviously, these future gold price estimates are NOT set in stone as many but, based upon the above historical data, it is estimated the price of gold may reach either of the following values by 2016:
- Projecting the gold price at a CAGR of 14.8% yields an estimated value of $3,022.
- Projecting the gold price at a CAGR of 26.6% yields an estimated value of $4,470.
*http://www.gold-eagle.com/article/gold-price-forecast-us-federal-reserve-balance-sheet
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