What the future holds for the price of gold is anyone’s guess, but it’s worth a try. There are those who call gold a bubble, but they have been proven wrong time and time again. Gold has corrected and consolidated before rallying throughout this bull market, yet people still have the nerve to call it a bubble. This betrays a total lack of understanding of markets in general.
The way I invest, if I am wrong, I turn around and change my position immediately. I’ve mentioned previously that I was short the market in March 2009 at the bottom. For a little while I lost money- that is until I swallowed my pride and realized I was wrong. By the 3rd week of March or so, I was net long. I then spent time trying to figure out why I was wrong. I didn’t sulk, rationalize my mistakes, or blame my losses on “manipulation.” If gold bubble experts could just objectively analyze the gold market and admit they are wrong, they would become much, much better investors in general.
People like to put others down to make themselves feel better. If you made money in gold and they missed out on profiting, they say you are some kind of conspiracy theorist. Or they try to bundle you up with the “foolish masses” who apparently are all long gold. This is interesting to me, because I know far more people who own Walmart than, say, Barrick Gold. About 2% of the people I know own physical gold. If there is some kind of gold frenzy out there, please show me where it is.
Talking to those With Experience
I have a habit of doing something that gold bubble experts surely don’t do: I ask people who experienced the 1980 bubble in gold for their thoughts on today’s market. Every single one I have spoken to has told me there is no comparison and that the gold market was way crazier in 1980. I have also spoken to gold dealers who have told me that buying activity has not really picked up as gold has risen in price. Again, the only gold frenzy out there is in people’s imagination.
The truth is that there is an intense bias against gold. I honestly can’t explain why. If the Dow Jones fell to 1500 next week, everyone would be screaming that it is undervalued. But guess what? The Dow Jones falling to 1500 would mean that it has matched the rate of appreciation of gold since 1980. So why is everyone screaming that gold is overvalued? Again, it has everything to do with perception.
The thing to look for in gold is a doubling in price in a 2-6 month time range. It is difficult to give price targets because you never know at what level this doubling will arrive. Given that we are consolidating at around $1500, $3000 is a pretty conservative price target. I tend to think we’ll see something closer to $5000 when all is said and done. People tend to think that $5000 is expensive, but remember, people have no problem putting down tens of thousands of dollars on a down payment for a home. If the monetary system starts teetering towards collapse, as I believe it will, people will have no problem buying golf at $5000. In fact, there will be a rush to buy insurance in the form of gold at this price.