On June 26, when gold was trading at $1,233 an ounce, I had forecast in my Trends in the News segment that it was near the bottom of its trading range, and it could go $100 to $150 lower. Nonetheless, I maintain my long-held forecast for gold to reach $2,000 an ounce. Why? Because there will be no meaningful economic recovery, and central banks will continue to debase their currencies by keeping interest rates at record lows as the government keeps printing money to boost growth.
For example, despite earlier promises this year by the Chinese government to reign in speculation by banks and investors, the state newspaper, Beijing News, quoted China’s Primier Li Keqiang in July saying the government would not allow the country’s gross domestic product to fall below seven percent.
Yes, gold can drift lower. In fact, it may be a year or two before it climbs above $2,000 per troy ounce. But for me, gold is a long term investment. At some point the central bank money-printing, low-interest-rate, stimulus Ponzi scheme will end. And when it does, the gold bulls will be breaking old records and setting new ones.
Moreover, there are two new factors driving gold prices today that did not exist in 1980 when gold began to crash from its $850 high. (I remember it well. I bought 100 ounces at the inter-day high of $875.)
This important fact is never discussed: During the 1970’s gold rush, it was mostly a US centric market. The same held true for silver. The markets were so thinly traded that the infamous Hunt brothers were accused of manipulating silver prices. Back then, there was no Russia or Eastern European players buying and selling precious metals in the commodities markets. Everything east of the Berlin Wall was locked behind the Soviet Union’s Iron Curtain. China, India, Brazil, Singapore and Indonesia, among others, were not major gold players, if they played at all.
Today, gold demand has gone global.
Another factor that makes the future of gold brighter today is that lower gold prices have spurred excessively strong demand for physical gold, particularly among Asian investors. That did not happen when gold prices fell throughout the 1980’s and 1990’s. With demand for physical gold rising sharply, there is also speculation of shortages resulting from less supply coming on the market from gold miners because prices are at or near production costs.
For me, gold, as it has been since the beginning of recorded history, remains golden!