Background
This was a target we set on Monday, June 19, 2006, however it is taking longer to get there than we anticipated back then.
It was 10 years ago but the reasons for this gold price forecast were roughly as follows:
No new large discoveries of gold deposits dampening supply
Lack of previous investment for gold exploration
It takes up to 10 years to bring a new mine to production
Falling gold production worldwide adding to its scarcity
Gold EFTs takes gold off the market thus reducing supply
In the last Bull Run 70s to 80s gold prices increased 20 fold
Metrics: DJIA vs. Gold, about 19ozs buys the Dow Jones; it has been 1:1 in the past and could be again in the future. Assuming the Dow Jones remains above 10,000 then the gold price could hit $10,000
Gold at its previous high of $850 adjusted for inflation puts the gold price at $2000 plus
Geopolitical uncertainty, a nuclear Iran creates world tension which pushes up the price of gold
A Dictatorial South America imposing restrictions such as increased taxation and nationalization will deter investment and reduce gold production
India is growing and the sleeping dragon of China has awoken, their hunger for gold will drive gold prices higher
Internet: information travels around the world in a nano-second, reactions to news, true or false, will add to the volatility of the gold price
Web trading: increasing every day, resulting in the trends being more exaggerated than ever before
The mania that I traded in during the last Bull market (1980’s) will be nothing compared to the coming Gold price explosion and maniacal actions of traders and everyday people in the precious metals sector.
Fast Forward to Today
There are a myriad of factors that deserve consideration when one is involved in predictive analysis, however two of the most important factors to add to the above rational are Debt and the increasing geo-political unrest.
The US national debt is approaching 20 Trillion dollars which is mind boggling in itself and last week we had the Federal Reserve delivering the first of a series of rate hikes; so pretty soon we will see the cost of finance eating its way through the new administrations budget. The US now has a Debt to GDP ratio of over 100 and joins the list of other countries that are in poor shape as seen below:
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