My first reaction when I read an article on this site by Arnold Bock - articulating why gold would go to $10,000 - by 2012 no less - was amazement. Who in their right mind would suggest that gold would eventually reach $2,500, let alone $5,000 or even $10,000? Well, I did some investigation and, believe it or not, Bock is in lofty company. Many respected individuals, such as David Rosenberg, Peter Schiff, Harry Schultz, Rob McEwen and many others, have come to the same conclusion. Below is a partial list of such individuals with reasons to substantiate their views.
As President & Chief Global Strategist of Euro Pacific Capital, Schiff correctly called the current bear market before it began. As a result of his accurate forecasts on the U.S. stock market, economy, real estate, the mortgage meltdown, credit crunch, subprime debacle, commodities, gold and the dollar, he is becoming increasingly more renowned.
He recently was reported in Business Week as saying that "People are afraid of the debasement of all the currencies. What's surprising is that gold is still as low as it is ... Gold could reach $5,000 to $10,000 per ounce in the next five to 10 years."
Rosenberg, the former Merrill Lynch North American economist and current chief economist and strategist for Gluskin Sheff, an independent investment firm for high net worth individuals, believes that "$3000 an ounce on gold may yet prove to be a conservative forecast." He went on to say:
- "if the gold price to world GDP ratio were to ever scale up to the peak three decades ago, it would imply an ultimate peak for gold of $5,300 an ounce.
- if the relationship between gold and the M3 money measure where to revert to the 1990 high, then gold would move to $5,700 an ounce.
- if gold were merely put on the same footing as the CPI, and head back to the previous peaks in this ratio, it would suggest $2,300 as the peak in gold - only a double from here.
- if the gold price-M1 ratio was used then gold would go to $3,100 per ounce under the proviso that prior highs get re-established."
Alf Field has been called the "world's best gold analyst." He is well known for his many spot-on predictions in the precious metals market and these are some of his determinations regarding the future price of gold;
a) "In the 1970's bull market, gold increased from a low of $35 to a peak of $850, a massive 24.3 times the low price. If the current bull market was to be of the same order, then one could project an ultimate peak of $6,221 (gold's low price in the current cycle of $256 x 24.3).
b) Field outlined in an article back in August 2003 his conviction, which he referred to again in his concluding November 2008 article on the subject of Elliott Wave and the gold price, "that the world, and especially the USA, was heading for a major financial crisis that would be so powerful that it would overwhelm all other factors [which] I referred to as the 'Big Kahuna' crisis. I anticipated that the Big Kahuna would give rise to the risk of a systemic meltdown, which would result in the authorities 'throwing money at problems', bailing out all the banks and large corporations that got into trouble. This would lead to the [eventual] destruction of the currency...The consequence of the systemic meltdown would be a vast increase in newly created money which would result in a massive rise in the price of gold" culminating in a "Major FIVE...to $10,000" [which] "can really only be possible in a runaway inflationary environment, something which many thinking people are suggesting has become a possibility as a result of the actions taken during the recent crisis." [Indeed,] "the odds strongly favor an inflationary outcome. Given a strong will and the ability to create any amount of new money via the electronic money machine, it seems a foregone conclusion that runaway inflation will be the end result. If Mugabe could do it in Zimbabwe, there seems little doubt that Ben Bernanke and his associates in other countries will have no trouble in doing it too."
a) "As gold keeps breaking new records...the fundamental factors behind the trend remain clear:
"- increased worries about the solidness of U.S. public finances
"- the lack of any serious government plan to resolve long standing issues related to the future of the social security system
"- eroding credibility of the U.S. motto about a strong dollar
" the general weakness in the fundamentals of the global economy
"[all of which make the] purchasing of gold...a store of value that thrives when uncertainty, insecurity, and fear rule the global economy. And when we recall the never ending speculations about the U.S. dollar's demise, it is only natural that the metal will find attention regardless of the price tag, until a bubble develops [but] we are apparently very far from that turning point. Gold has some powerful dynamics behind its rise, and it doesn't seem outlandish to imagine a target of $3000 - $4000 in the next 5 years, if, as anticipated, economic activity goes for a second dip once the impact of government stimulation and private speculation and bubble-building lose their dominant effects in the markets."
b) the ten-year long correlation between gold and the Euro has broken down recently [and it is] "our expectation that gold will generate a super-bubble in the next 2-3 years, and perhaps longer, provided that policy accommodation remains in place even as investor confidence evaporates completely."
Harry Schultz' International Harry Schultz Letter (a paid subscription investment service) has gold going up eventually to $6,000 saying "We (collectively) are poised at a heart-stopping moment in economic times. On the one extreme side, the world is on the edge of massive deflation and depression. At the other extreme is - hyperinflation. My view is that both these extremes are possible. Certainly deflation is, on balance, in play today and gaining ground as money supply is actually declining! Hyperinflation seems impossible when there is not much inflation in most economies. But ... hyperinflation is a monetary event, not an economic one, and will happen on an overnight basis, not via a general uptrend in inflation data... As I write, gold is holding very near its high, as most stock markets are bungee jumping. This implies the unexpected hyper is pending, because if it were exclusively deflation ahead, gold action would be less buoyant."
As such Schultz recommends that one put 40-50% in gold stocks and bullion; 10-15% in other commodities; 30-40% in government notes/bills/bonds; 8-10% in non-gold stocks and 0-5% in bear stock-market protection via inverse exchange-traded funds.
Egon von Greyerz:
Von Gruyerz, managing director of Zurich Switzerland based Matterhorn Asset Management and founder of precious metals investment and storage company GoldSwitzerland.com commented in an interview with CNBC Europe's Squawk Box recently that the nominal high of $850 per ounce gold price, when adjusted for "real inflation" as per shadowstats.com, is equivalent to approximately $7,200 in today's prices. Accordingly, "gold could easily go up six times from the current price of $1,220 and still be within normal parameters."
He went on to say that at current prices, "There will be nowhere near sufficient gold to satisfy demand." As a result, his firm is expecting the gold price ascent to be "relentless during the remainder of 2010, with very few major corrections but with high volatility. Moves of $100 in one day could easily happen. So gold is likely to make a top in the next few years between $5,000 and $10,000."
Cooper, author of a book entitled, appropriately, "Dubai Sabbatical: The Road to $5,000 Gold," maintains that "Governments around the world have forced interest rates to artificially and unsustainably low levels to combat the global financial crisis. Low interest rates mean high bond prices. Ergo, as soon as interest rates go up - as they will have to sooner or later - bond prices will fall...and if you want to keep your money out of bonds...then precious metals and/or cash are the best options.
The real kicker for gold, and even more for silver is in the supply and demand position. Precious metals are in limited supply - that indeed is their great strength as a store of wealth - so once the shift out of bonds accelerates so will the price of gold and silver.
Now government bond markets are far bigger than global stock markets while precious metals are amongst the smallest of major asset classes. Pouring this quantity of money into a very narrow precious metals market will send gold and silver prices through the roof. $5,000 an ounce for gold is a very conservative forecast under these circumstances."
McEwen, chief executive officer of U.S. Gold Corp. and founder of Goldcorp Inc., believes global gold prices may increase to $5,000 an ounce between 2012 and 2014 as rising U.S. government debt weakens the dollar saying recently in a Bloomberg Television interview, "Money supply has expanded so rapidly that there are a lot more dollars looking for a steady home. Governments cannot help themselves. They want to help the economy. They are printing money. They are going into debt on a horrific scale, and that will depreciate the value of the dollar."
He says his forecast for gold represents a "once-in-every-300-years" phenomenon and holds by his previous forecast that gold will rise to $2,000 an ounce by the end of this year.
Krauth, a highly regarded market analyst and expert in metals and mining stocks, maintains that "there are five sound reasons why gold will soar to $5,000 an ounce, namely:
"a) Potential Inflation: Since 2001 - under benign price inflation of roughly 2.5% - gold has managed to rise about 400%. Meanwhile, the U.S. Federal Reserve is widely expected to keep short-term rates near zero through this year, leaving the door open for rampant inflation, and central banks worldwide have rolled out an unprecedented $12 trillion worth of stimulus programs, with most of the money still to be spent.
"b) Exploding Investment Demand: Large institutional investors - hedge funds and pension funds - are making large allocations to gold, as are individual investors. According to the World Gold Council, demand advanced 15% from the second quarter to the third last year with a quickly developing middle class, whose members are experiencing rapid escalations in disposable income, becoming a major bullish driver for the price of gold.
"c) Central Banks are Becoming Net Buyers: 2009 was first time in 20 years.
"d) A Looming Currency Crisis: The "PIGS" - Portugal, Italy, Greece and Spain (or "PIIGS," if you want to include Ireland) - aren't in very good fiscal shape - and they aren't alone. Iceland has already gone over the edge. The United States, the United Kingdom and countless other economies are struggling. That reality has ignited a crisis of confidence about fiat currencies in the minds of many investors. Under such conditions, gold - the ultimate store of value, and the oldest existing form of money on earth - will soar as investors seek to protect their purchasing power.
"e) The Mania Stage Has Yet to Begin: The gold bubble that takes prices to all-time-record levels will inflate in three distinct stages - currency devaluations, growing investment and then a stratospheric ascent - and, make no mistake, the $5,000 price point will most likely be reached in this third and final phase."
And let's not forget:
"No wishful thinking here! As I see it gold is going to a parabolic top of $10,000 by 2012 for very good reasons":
a) Sovereign debt defaults,
b) Bankruptcies of "too big to fail" banks and other financial entities,
c) Currency inflation and devaluations,
d) Precious metals market manipulation,
e) Insufficient physical supply, and
f) The need for a safe haven investment refuge,
"All of the above will lead to rampant price inflation and drive precious metals bullion and mining stock to unimagined heights."
So there you have it. Many reasons by some of the most informed individuals around who all contend given the financially troubled and volatile times we live in that gold (and by implication, silver) is the place to be for an outstanding return on one's investment and to shield oneself from the rampant inflation and currency devaluations that are on the horizon.