On July 11, 2011 I said “one only needs to take a look at the big picture to understand how futile any long-term bearish stance is! It was my belief then that gold would soon trade to a new record top. Gold was at 1543, a far cry from multiple new record tops, and $1624 new record high hit yesterday.
Where's gold headed? To infinity and beyond? Not quite, however it is my belief that over time gold prices have nowhere to go but up. This fact I believe was set in motion when the gold standard was abolished in the 1970s. Starting with United States, this monetary policy would soon be adopted globally. Gold now stands as the definitive benchmark by which all other currencies are measured. Simply put: gold is the new currency of choice.
We need not ask if gold will go to 2000, but rather when gold will reach at $2000 per ounce. I see $1800 gold by the beginning of 2012. $2000 gold?, I believe by 2013. A tremendous stretch ?, consider the following:
In my first commentary for Kitco.com (10/2010) I suggested that gold was in a super bull cycle. The chart above is a weekly chart of cash gold. Since 2008 gold has been doubling roughly every three years. It took gold five years (from 2002 to 2007) to double in price (300 to 600). From 2007 to 2010 gold would double again from 600-1200.
I believe we are fully immersed in a 13 year super bull cycle. This cycle began in 2002. Entering its strongest phase in towards the end of 2008. Then gold was trading at just $800 per ounce. It would take about 3 years for gold to double. The fruition of that fact was realized this month, when gold reached a new major benchmark “$1600 per ounce”.The progression of doubling every 3 years countinues.
There can be only one conclusion derived from this data: First: We are witnessing the greatest rally ever witnessed in the precious yellow metal. Secondly, based upon this data if gold doubles from 1000 to 2000 within 3 years, as it has since 2008, it should only take another two years (2013) to reach $2000.
The chart below plots relative price movement over a year and extends that price gain forward. Based on this pattern, I believe we will see $1800: dollar gold by the end of 2011 or the beginning of 2012.
We have been witnessing not only an acceleration in price but also a tremendous acceleration in time. Chart 3 (below) clearly illustrates this. Gold has been has been consistently doubling about every three years. Further evidence that $2000 gold by 2013 is highly probable.
Silver
Although it has been gold that has making new record highs, it is silver that has outperformed all of the other precious metals in terms of percentage price gains. Over the last year and a half, silver has increased in value more than any other precious metal. Currently silver is experiencing some resistance at $41 per ounce. My long-term view of silver is in tandem with my gold forecast. That is to say that over time new record highs will be reached. I would not be surprised to see $70 silver by 2013. There are three major pivot points or benchmarks silver will have to overcome before surpassing its all-time high. Based upon the Fibonacci retracement from the recent correction of $50-$32, the major pivot points are $41(50%), $43 (61%) and 46 (76%) dollars per ounce.
The hard truth is that the fundamental factors driving gold higher do not exhibit very much faith in the monetary and budget policies of the European Union and the United States. Best characterized as a short sighted this disposition of spend now and pay later cannot effectively go on forever. At some point the bill must be settled.
”I will gladly pay you on Wednesday for a hamburger today” the trademark saying of a 1960s cartoon character, must not be the principal by which major countries define their fiscal, economic and budget policies
Are the Bulls dancing? According to a Japanese proverb “We're fools whether we dance or not, so we might as well dance.” And dance we will.
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