Today’s chart of the day examines the latest data from the World Gold Council and Deutsche Bank regarding global asset allocations across all asset classes.  11 years into their secular bull runs, gold registers at a measly 1% of global asset allocations (and this 1% is mainly paper gold such as ETF’s, unallocated accounts, and mining shares), and silver fails to even register on the chart.

When the current bull market in gold and silver finally reaches the public involvement stage, imagine the prices required to allow even a conservative 5-10% global allocation, much less match historical tops near 20-30%.

Got PHYZZ??

 

Source: WGC, Deutsche Bank

 

  1. In the words of that great philosopher, Mr T, “I pity the fools’ 
    If the entire gold inventory held above ground is 160,000 tons worth about $4.5 trillion, and if that is 1% of global asset allocation, then the other 99% is worth about $500 trillion.  That seems very high in relation to the world wide net worth of $75 trillion but we are talking about paper.  95% of the world wide global asset allocation is PAPER.  That’s does not sound comforting to me.  4% is alternatives? farmland, oil wells, gold mines?  Good hard assets if you can dig, pump or farm.  Gold sounds better and better all the time.

    • I think there are too much savings in paper compare to the physical alternatives because the world’s population is too big for everyone to keep their savings in the alternatives. That’s probably the reason why the fiat system was installed.

  2. Silver could go to a hundo an oz and the world wouldn’t really notice.
    Nobody has any. That’s why it seems counterproductive to try to regulate its price. Higher prices mean more is scrapped, more is dug up.
    This would itself mitigate the blow up to come.
    If we were all seeing regular gains, we’d shut up about it. Like baby birds, when they’re fed they quiet down.
    I never saw a site devoted to the evil manipulation of palladium.. They got their’s.

  3. It would be interesting to see how this chart has changed over time – say within the past 20 years. 
    Am I the only one who feels bonds are a bubble waiting to burst?

    Wonder what % of bonds are held in pensions…?  

    • “Am I the only one who feels bonds are a bubble waiting to burst?”
       
      Nope, definitely not.  Bonds are a debt certificate that entitles the holder to claim a fixed rate of interest payments for a fixed period of time and when they mature, the original bond price as well.  As such, they are a large part of the HUGE amount of debt that is sloshing around the world’s financial system today.  As we all know, anything done to excess becomes cheaper and it would be difficult to find anything that has not been so excessively over-done as bonds.  
      In the case of the US,  the US government bonds and the US dollar are intricately linked.  When either of these collapses, the other will follow and rather quickly.  In the past, the US economy was a powerful system of production and distribution of very high quality goods.  Our national debt was low compared to our assets and earning potential.  With the US dollar as the world reserve currency, there was no limit on our borrowing because lenders knew with certainty that they would get their interest payments on time every time and that they would get their principal returned.  
      Unfortunately, this is not the case today.  Our economy is large but weakening.  Our debt is large and growing.  Many are wondering if we will pay our debts.  Bond interest rates have been manipulated by the Fed such that they now pay a rate of interest that is negative because the official rate of inflation exceeds the interest rate on the bell-weather US 10-year Treasury bond, not to mention that REAL inflation rates are in the 3-4 times this amount and moving higher.  Bond Guru Bill Gross took his PIMCO bond fund out of US Treasuries a few years ago.  Yes, he may have been early on that call but he was essentially correct.  Credit rating agencies, such as S&P, Moody’s, and Fitch have downgraded US debt and seem set to do so again, especially if the “fiscal cliff” is not avoided.  Bond prices will fall if this occurs.   I disagree with the idea that the so-called fiscal cliff is “dangerous” or destructive”, however, as it is really nothing more than an automated move towards living within our national income.  Taxes will go higher and spending will be reduced… in theory, anyway.  Repeating this as needed WILL result in a government that is sized to our economic capacity and not merely some gargantuan behemoth that grows ever larger, no matter our ability to afford it.
      At some point, many of those knee-jerk investors who have always piled into US government paper assets as a safety measure will discover that they are not in as safe an investment as they think.  They will become nervous.  If they bolt for the exits en masse, the bond market will collapse and take the US dollar down with it.  :-(

  4. No truer words have ever been spoken.  The total world wide net worth is something on the order of $60-70 trillion, dependng on which convenience store is being robbed of its last bottle of Tide HD.  The total world wide existing debt (derivatives notwithstanding) is about the same thing.   The world wide GDP is also about $70 trillion
    Debt interest rates are very low in Europe, ranging from .5% to 2.0%, not including Spain Italy and Greece.  We are about 1.75%  Japan in ZIRP and  China is quite low.  I would guesstimate that the average blende interest rate world wide is under 2.5%. This is ridiculously and unconscionably low, buffered by the idiots and their Binford 1200s.   In the real non-ZIRP world typical government rates are 5-6% and have been as high as 12-14% back in the early 1980′s.  When rates go up and they will be forced to do so once inflation strips any investor from these PONZI POS loans, the face value could drop by 25 to 50%.  If the feds nationalize pensions, something that will be forced by markets unwilling to buy our debt, the holders of these GRAs will see their holdings drop by the same amount and still produce a completely crappy yield at least 60-70% below the real inflation rates.   The BOYZ at PIMCO must be crapping their drawers. No wonder the boss at Pimco is going into gold.  PIMCO will be hammered along with the other investors, pension plans and JQC will get hammered.  That collapse will be ugly beyond imagination since no one has seen this since our depression and the Weimar Republic  As an FYI  Porter Stansberry spoke of this in his book printed in 2008 or so. It was the pivotal book that got me going down the Red Pill Yellow Brick Road

    • “In the real non-ZIRP world typical government rates are 5-6%…”
       
      Indeed so, AG.  In fact, a 4-5% bond coupon would be about an average return over the past 30 years or so, the aberration of the Carter years notwithstanding.  The fact is, the US had MANY years of great economic strength with interest rates at these levels, so the idea that we MUST have a ZIRP is utter nonsense and history proves it to anyone who cares to look at it.  Bernanke does not so choose, unless it is convenient and lately it hasn’t been.
       
      “When rates go up and they will be forced to do so once inflation strips any investor from these PONZI POS loans, the face value could drop by 25 to 50%.”
       
      Indeed they could.  Now add on to that the loss of world reserve currency status and another large chunk of value is stripped off.  Although the estimates vary, many economists think that loss of WRC status could cause a 1/3 drop in the value of the US dollar all by itself.  Many people do not realize that the US dollar IS the WRC, let alone what this means.  Basically, it means that the USA is the only country on Earth that does not have to first convert its money into dollars to settle international trade obligations.  This causes an enormous demand for US dollars so that other countries can do business around the world in a universal currency.  China, Russia, and several other creditor countries are pushing hard for not using the US dollar for trade anymore.  It is hard to blame them for this, given the massive money printing program that Bernanke / Bush / Obama have pushed.  The bottom line is that when WRC status for the US dollar is lost, everything we buy will almost instantly rise in price by about 1/3… call it a 30-35% increase in all prices literally over-night.  Because of this, we would all have about 1/3 less buying power than we had before WRC status was lost. Got $300k saved for your retirement?  POP!  Guess what?  Now it’s only worth about $200k.
       
      “If the feds nationalize pensions, something that will be forced by markets unwilling to buy our debt…”
       
      Considering that the Fed is already buying over 70% of US Treasury offerings, it is clear that markets are already unwilling to buy any more US debt.  In years past, the “bond vigilantes” helped to keep the government spending under control.  They did this by raising the amount of interest demanded if the government became financially reckless, which is to say borrowed and spent too much money.  Back in those days, the Fed set the short term interest rates but the bond market set the long term rates.  Somehow, and I have no idea how this was managed, Bernanke has found a way to cow the bond markets into letting the Fed set both long and short interest rates!  That we have ZIRP now and will have it until at least 2015 shows us who is in charge here.  Bonds WILL pay a pittance and Bernanke & Co. will see to it by buying up all the bonds that do not sell in the open market.  If not for this, interest rates would be forced higher in order to make these bonds more attractive and increase the number of buyers wanting them.  Without this distortion of the government bond market, 70% of the bonds in any offering would go unsold and only a higher coupon rate would allow the government to borrow as much as they want.  Otherwise, the offering fails, the bonds remain unsold, there is less money to spend, and the government guys look like idiots for making a bond offering so far below a desired rate of interest that over 2/3 of the bonds do not sell.
       
      “The BOYZ at PIMCO must be crapping their drawers.”
       
      Unless they recently jumped back into US Treasury paper, they should be fine.  They got out of the US government bond market in 2009, IIRC.  They then went into a lot of foreign debt paper, mostly in emerging markets, and at significantly higher rates than can be had in the US government bond market.
       

    • I’m thinking that we have 2-3 years remaining before we hear “the giant sucking sound” as the debt bubble collapses.  At least, that is what I am hoping for.  Time is that most valuable of commodities and the more of it we have to prepare for what many of us believe is coming, the better.  This is of huge importance, especially for those of us who have families who do not believe that anything bad will happen, as we must prep for them as well.

  5. The most amazing thing about this chart is that 99% of the world’s money is debt, with only 1% real money (physical gold–and silver).  Debt is not money–debt is slavery, but somehow the world has come to treat debt as money.  Real money is money no matter what.  Debt can be paid back, or it can be defaulted upon (or inflated away with worthless currency).  And right now, it is a wonder that anyone in the world can think the massive worldwide debt stands a chance of ever being paid back.

    • That’s true! I hate when refer today’s currency as “money” when they are not because they are all fiat currencies which loses values overtime due to too much currency supply. When the Zimbabwe dollar collapsed, people still refer that dead currency as money.

  6. Ed I forgot about the US losing its WRC status.  That 30% drop coupled with the bond price collapse would be so devastating
    I can barely contemplate the aftermath. 
    As for the Fed not being able to sell its bonds, it reminds me of the scene in Blazing Saddles when Clevon is on the gallows, grabs a gun, puts it to his head and shouts out ‘don’t shoot the black guy’ 
    I doubt if the Chinese will fall for that when Bernanke or his successor tries to save our collective currency hides with that trick. I also forgot that Gross/PIMCO did exit  the UST a few years back. He talked some serious trash about the US bond market too.
    I’m surprised he is still breathing.  He is still out of the market and talking up gold.

  7. I wonder he percentage of the global asset allocations in silver and what’s the percentage of people holding physical gold and silver. Precious metals will eventually get people’s attention as the fiat system collapses.

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