It is sometimes frustrating to see the focus on gold price forecasts. The more sensible and spectacular the price forecast, the greater the cacophony.
It’s worth looking back at some of these predictions to help put things in perspective.
TITLE: Gold Forecast $ 6000, and Gold Mining Analysis Display Display January 23, 2012
Quote: “If the current bull market were to continue as long as the bull market of the 1970s, the price of gold would reach $ 6,000 by 2014. “
Gold price January 23, 2012: $ 1679.00 per oz.
Gold price March 14, 2014: $ 1382.00 per oz.
Gold price as of December 31, 2014: $ 1181.00 per oz.
How far can the price forecast go? Not only did gold reach its target price, it went in the opposite direction – starting in the same month – and fell thirty percent over the next two years, ending at $ 31,2000.00 per ounce on December 31, 2013.
The problem is not the $ 6000.00 gold credibility. It is very believable, and possible; perhaps even more likely. However, the prediction was timed and misjudged in terms of direction and timing.
All this is an excuse. If you do not own a subscription service and / or do not make investment recommendations or trade advice to others.
TITLE: JPMorgan expects $ 1,800 gold in mid-2013 February 1, 2013
Mention:“JPMorgan sees $ 1,800 gold in mid-2013 South Africa in “crisis” and “increasing instability” in the Middle East JP Morgan Chase & Co. said gold will rise to $ 1,800 an ounce by mid-2013 with the South African mining industry. “In crisis,” according to Bloomberg.“
The price of gold was $ 1667.00 an ounce on the day the holder appeared. Five months later, on June 29, 2013, the price of gold was $ 1233.00 an ounce.
The $ 1800.00 call was a “safe” forecast. An eight-percent increase from the then (then) $ 1667.00 level would only lead to a gold price of $ 1800.00.
But, as in the previous example, the price went south with a vengeance; this time dropping twenty-six percent in five short months.
TITLE: Trump signs of winning $ 1,500 Gold… November 10, 2016
Quote: “Trump’s victory in the US presidency represents $ 1,500 a pound for US gold … in the interim.”
Gold price November 10, 2016: $ 1258.00 per oz.
Gold price as of July 31, 2017: $ 1268.00 per oz.
Apparently, gold didn’t see the “signal” as its current price is almost the same as the announcement appeared in print on the day after last November’s election.
And what does the writer mean by “middle term”? The longer the time, the lower the value of the predictions. The projected increase in the dollar is twenty percent. If it takes two years, it will be about ten percent a year. In that case – or if it takes more than two years – is the title worth it?
TITLE: Trump will send the gold price to $ 10,000 November 10, 2016
Gold prices and dates are the same as in the example above. Where gold was ten months ago, when can we expect progress towards that price target?
Strange price forecasts are usually based on a breakdown or collapse of the monetary system. The breakdown comes as a result of a complete denial of the U.S. dollar, after decades of depreciation. People simply refuse to accept and hold US dollars in exchange for the goods and services they offer.
Now suppose you were a goldsmith at that time. Would you sell it? At what price? How much worthless dollars would you spend on an ounce of gold?
If someone offered you a billion dollar monopoly monster today for an ounce of gold, would you take it? How about ten billion?
Okay, what if we see a dramatic drop in the value of the US dollar in the coming years? Suppose that the decline is a loss of dollar purchasing power of fifty percent of current levels. This would be priced at approximately $ 2500.00 an ounce of gold, doubling the current levels.
This is valid if gold and the US dollar are currently in equilibrium (I think). In other words, the current gold price of $ 1250/60 is a precise reflection of the cumulative decline in the value of the U.S. dollar since 1913.
Fifty percent of the U.S. dollar’s purchasing power would be reflected in rising prices for other goods and services; a model that has become very popular over the last hundred years.
Assuming the market works, and you assume that you sell some gold and make a profit, how much more will it cost you to decide to buy it? Do you really think that you can buy “discounted” price items at that time?
Gold, in 1913, was $ 20.00 per ounce. It is currently $ 1260.00 per ounce. That has risen more than sixty times. But it does not indicate profit. The general price level of goods and services today is sixty times higher than in 1913.
In short-term situations, there are times when you can take advantage of sharp gold moves. They are generally preceded by large price movements in the US dollar, which reflect the realization of the accumulated decline in the purchasing power of the dollar. And, to a lesser extent, the recognition that the expectations of others take the price of gold far beyond balance against the U.S. dollar.
In 1999/2000, gold was priced low at $ 250-275.00 an ounce. It started a long decade later, ending in 2011 with a high price close to $ 1,900.00 per ounce.
After peaking in 2011, gold fell in the next five years to less than $ 1,000.00 per ounce. A short-lived rebound in early 2016 returned to current levels ($ 1250-1350.00), where it has generally remained unbroken without a major level.
Where were all these ‘experts’ in 1999/2000 and what did they predict then?
And since 2011/2012? They’ve been saying almost the same thing over and over again. Buy now! Buy more! Before it’s too late!
One day, it will be too late. But now it’s more about financial survival than ever. The obsession with profit, foresight, and trading has obscured the real foundations.
And one way or another, most people’s profits are likely to smoke before they can do anything meaningful with them.
Gold – physical gold – is real money. It’s real money because it’s a store of value. And its value is constant. The value of the US dollar continues to decline over time. The steady decline in the value of the US dollar and the perception that people have of it, as well as its expectations, determine the price of gold.