From a client memo being attributed to Citigroup Chief Technical Strategist:
"The damage caused by the financial excesses of the last 25 years is forcing the world's authorities to take steps that they have never tried before. This gamble is likely to end in one of two extreme ways: with either a resurgence of inflation, or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold."
"They are throwing the kitchen sink at this. The world is not going back to normal after the magnitude of what they have done. When the dust settles on this, the world will see that it will either work, and the money they have pushed into the system will feed through in inflation shock, or it will not work because too much damage has already been done and we will see continued financial deterioration, causing further economic deterioration, and the risk of a feedback loop. We don't think that this is the more likely outcome. But each week as it passes, and each month passes, there is a growing danger of a vicious circle as confidence erodes. This will lead to political instability.
"We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes, because people are feeling disenfranchised...
"What happens if there is a meltdown in a country like Pakistan, which is a nucelar power? People react when they have their backs against the wall...
"We are already seeing doubts emerge about the sovereign debts of developed, AAA-rated countries /like the United States/, which is not something you can ignore...
"Gold traders are paying close attention to reports from Beijing that China is thinking of boosting its gold reserves from 600 tons to near 4,000 tons in order to diversify away from paper currencies...
"Britain had made a mistake selling off half its gold at the bottom of the market between 1999 and 2002...
"People have started to question the value of government debt...
"The blast-off /in gold prices/ is likely to incur within two years, and possibly as soon as 2009. Gold was trading yesterday at 812 oz. It is well off the all-time peak of 1030 in February, but it has held up much better than other commodities over the last few months, reverting to its historic role as a safe-haven store of value and a defacto currency. Gold has tripled over the last three years in value, vastly outperforming Wall Street and European bourses."
