CAPE TOWN, South Africa -- Speaking at the Mining Indaba conference here, James Turk forecast that gold could reach $8,000 per ounce by 2013-2015. He added that that may be too conservative.
Turk, the founder of digital gold currency GoldMoney, said individuals should own bullion not as an investment, but as a wealth preserver.
"Gold is not a commodity. It is not volatile. It is not an investment. Gold is money," Turk told an audience of nearly 1,000 delegates.
He illustrated gold's ability to retain its purchasing power by comparing the price of oil in British pounds, US dollars, German marks, euros and gold. Only gold had maintained its purchasing power since 1950, with massive losses for the currencies, especially the pound.
"Gold is a form of money that holds its value over time," said Turk, adding, "capital is a precious resource that is best preserved with gold."
He explained gold's fundamentally different character as a tangible asset that was accumulated, or saved, rather than consumed. It's value derives from its utility as a medium of exchange for things like food, shelter and communication.
"Gold as money is a mental tool that enables economic calculation unchanged through human history," Turk told the audience of mining and investment professionals.
Turk bases his forecast on a long-range view of boom-bust cycles. He believes we are currently moving through a bust of epic proportions as individuals, companies and governments are forced to restore balance to their balance sheets.
"The bust has not yet peaked and you should own gold to preserve wealth until it has."
He projected the cycle via a ratio of the Dow Jones Industrial Average to gold. He asserts that the ratio will again revert to one, and that's where his $8,000/oz prediction lands.
Turk said that a collapse of the dollar was inevitable because the United States, among other countries, was in a structural crisis that could not be avoided via interest rate increases.
"The US is not suffering from a cyclical deficit, but a structural one. It is a path to hyper-inflation.
"Japan's credit rating has just been cut. It is probably the first slow fuse to be lit."
Turk laid his thesis against the strong correlation of the Federal Reserve's monetization of US debt with the S&P 500. Since the launch of quantitative easing, the correlation has been almost perfect.
Meanwhile, he pointed out that the US appears to have entered a "debt compounding" phase. As a result, the country is now extremely vulnerable to even moderate increases in interest rates which have begun to move up.
"We cannot replicate the previous [1980s] high interest rate cure for mismanagement of the economy," Turk concluded. He believes the US currency will inevitably collapse as a consequence.
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