The Future Gold Price

June 10, 2011 8:57 pm 19 comments

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.

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  • Anonymous

    MK:  There are just so many disinformation specialists out there who are following the lead of those who wish the USD to remain the safest haven.  Unfortunately, we have passed the tipping point on debt and there is no question that the full debasement of the USD is a foregone conclusion.  The problem with “traders” in PMs is that in a manipulated sector, your bets might as well be done at the roulette wheel.  The average guy will never know when the bullion banks, in collusion with the CME and the CFTC , decide to raid with vast amounts of naked shorts.  Better to be an investor in physical only (definitely not paper) and wait for the big debt epiphany, which is only months or years, not decades away.  There are many of us who actual have patience and can wait.  As to the eventual price levels; I really don’t care, but I assume that my ultimate adjusted annual returns will be far in excess of either compounded CD, dividend or bond returns over the same period.   Of that, I have 100% confidence.

  • Martin

    Hi.

    First of all, thank you for excelent blog and insights. It helps me to stay focused and not getting distracted from the noise around. :)

    My question is, why do you think, that we will see higher prices of gold in 2-6 months?

    Thank you, Martin.

    Ps: sorry for not propper english, i am not native speaker. :)

    • http://www.expectedreturnsblog.com Moses

      I don’t necessarily think we’ll see higher prices in the next 2-6 months. I was referring to the tail end of the bull market in gold, which will probably be characterized by a doubling in prices in a very short time frame.

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  • Akshay999

    is gold have to show a deep in 2 day

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  • Ken400

    If anyone wants to email me and answer a question I have about a gold purchase I’d love to chat with someone knowledgeable.  Ken400@gmail.com

  • Praveen1982jolly

    i trulybelive gold will reach a new height and investing in gold be a good think.  

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    You can`t go wrong with gold.

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  • Chitra17balu

    hi iam chitra
                         when i’ll be the gold rate reduce that time is a very very good time in my life

  • Mo

    Today is a pretty good point to buy, the rally is about to start, Hurry up guys!!

    • lidya

      There is already ongoing big rally towards south not north.  

  • Sajjadhus

    What will be a future
    of gold. How you see and how it will move. Definitely gold is a metal
    and link with commodity. Its dealing turn with currency but when
    currency itself get in trouble what will happen with this commodity?
    What would be the ultimate results? Do we see the currency crisis or
    this is artificially made to divert the market? Who or what force is
    working behind this scenario?
    Anyone who has loss on long term gold investment? Why now?

    Let hope to have some of your ideas.

    • Anonymous

      Well gold is trading as a hybrid commodity and currency right now, which will change when we have a currency and/or bond crisis. 

      Fundamentally there is too much capital in bonds right now, and some of this capital needs to released in other assets that are deemed to be alternatives. 

      And your returns on gold depend on your time of purchase. Most people I presume are sitting on a gain, unless they bought last year.

  • Alf

    Hi all.
    I am not an expert for gold but i try to look logically on the whole problem of gold price.
    So, I believe that the price of the gold will go sky rocketing in the near future because of the one simple reason.
    As someone says, gold is the metal and its quantity is definitive, from another side paper money is infinitive.
    How the world populations is growing every day, than demand for the gold will be higher and higher.
    Also, if we look monetary situation these days, you can imagine what will happen with gold price if paper money system collapse.
     

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  • Alisha

    I believe gold investing is a hedge on other investings. Gold is a really valuable asset, which can readily be converted into cash at the time of need. We can see how the central banks are stashing on gold for future, this shows that its prices will definitely go high in near future. See more on it:- http://www.primebullion.co.nz

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