Ben Davies - Fair Value on Gold Today is Over $4,000
In an exclusive interview with King World News, Ben Davies told KWN the fair value of gold today is over $4,000. Ben Davies, CEO of Hinde Capital, also said the public is now starting to enter the gold market. Here is what Davies had to say: “The theme I had last time we were talking, ‘This was to be the year of defaults.’ I spoke specifically about a (coming) risk asset rally. One thing that was very evident to me, at the end of last quarter, from my trip to Asia and in conversations I had with fund managers here in Europe and the UK, it was very evident a lot of people had moved to cash.”

“What we’ve experienced since I was last on the show, and something I thought was very much in the cards, was this risk asset rally. We’ve seen the physical metals, some of the industrial metals have done very well out of the chute this year, posting double digit returns. Obviously they had been quite suppressed into the end of last year.

More importantly stock markets have rallied, but it feels like a reluctant rally because people were in cash. They really haven’t participated in this, it’s classic discounting mechanism. We had gone to the edge and then the ECB came out and waived their magic wand and provided an inordinate amount of liquidity.

People have underestimated what a big impact this has had (on the markets). The ECB balance sheet has grown substantially. The banks, for now, can survive any kind of euro earthquake. Certainly for the next three years.

Of course, risk assets have runaway and with it gold and silver....

“I think for the moment, the market, post-FOMC, rates are on hold forever it would seem. According to Ben Bernanke he is trying to drive inflation in the system to reduce the burden of the debt.

In such a situation, gold popped higher in the short-term. The markets are now clearly overbought. Everything we look at in the short and even the medium-term is suggestive that we have to chop some wood here. The question on all of our minds is, how much is the market going to come back?

Perhaps we can suggest the market is not going to correct that much and work off the overbought (condition) in and around this $1,700 to $1,740 level and then move higher. If they (the Fed) do nothing more, the monetary base is very high now and gold and silver look extremely undervalued relative to that (monetary base).

The only question is will the deleveraging suck up some of that money? At the end of the day, if you balance off the deleveraging and the money that’s been pumped into the system, what we would be left with is gold and cash. That’s where we will be able to ascertain the true value, but I suspect it is somewhere north of $3,000 an ounce.

The high net worth and retail investor is really starting to accept that gold is here to stay. They are beginning to understand it should be part of your portfolio. So I’m really constructive over the course of this year.

I would not be surprised if 2012 is the year we really start to get that retail momentum into the (gold) market. So it’s not inconceivable the numbers I have posted in latter years, that we start getting back to what I consider fair value relative to the monetary base, which is, of course, over $4,000.”

This interview is one of Ben Davies most powerful ever. He covered gold and silver along with what fundamentals are driving key asset classes. The KWN audio interview with Ben Davies is available now and you can listen to it by CLICKING HERE.