It is sometimes frustrating to see attention focused on gold price predictions. The more sensational and spectacular the price forecasts, the greater the cacophony.
It is worth looking back at a few of these predictions to help put things in perspective.
TITLE: $ 6,000 gold forecast and gold mining analysis through visualization January 23, 2012
Quote: “If the current gold bull market were to track the time and scope of the ’70s bull market, the price of gold would reach $ 6,000 before 2014. “
Gold price January 23, 2012: $ 1679.00 per oz.
Gold price March 14, 2014: $ 1382.00 per oz.
Gold Price December 31, 2014: $ 1181.00 per oz.
How far from the base can price prediction be? Gold not only did not reach its target price, but moved in the opposite direction – starting the same month – and continued to decline by thirty percent over the next two years, ending on December 31, 2013 at $ 1,205.00 an ounce.
The problem is not in the acceptability of $ 6000.00 gold. This is very likely and possible; maybe even probably. However, the prediction was particularly time-oriented and terribly misjudged in terms of direction and time.
All this is justified. Unless you own a subscription service and / or give investment recommendations to others or issue trading tips.
TITLE: JPMorgan predicts gold to $ 1,800 by mid-2013 01Feb2013
Quote:“JPMorgan sees gold at $ 1,800 by mid-2013 while South Africa is “in crisis” and “escalating instability” in the Middle East JP Morgan Chase & Co. says gold will rise to $ 1,800 an ounce by mid-2013, with South Africa’s mining industry “in crisis,” according to Bloomberg.“
The price of gold on the date the title appeared was $ 1,667.00 an ounce. Five months later, on June 29, 2013, the price of gold was $ 1,233.00 per ounce.
The call for $ 1800.00 gold was a “safe” prediction. Only an eight percent increase from the existing (then) level of $ 1,667.00 would result in a gold price of $ 1,800.00.
But, as in the previous example, the price retaliated to the south; this time by twenty-six percent in five short months.
TITLE: Trump won $ 1,500 signals Gold … 10Nov2016
Quote: “Trump’s U.S. presidential victory signals $ 1,500 an ounce for gold … in the medium term.”
Gold Price November 10, 2016: $ 1258.00 per oz.
Gold price July 31, 2017: $ 1268.00 per oz.
Obviously, gold did not see the “signal”, because its current price is almost identical to the price on the day when the prediction appeared in the press immediately after the election last November.
And what does the writer mean by “middle term”? The longer the time frame, the less prediction. The projected growth of the dollar is twenty percent. If it takes two years, that’s about ten percent a year. In that case – or if it lasts longer than two years – is the title titled in bold valid?
TITLE: Trump will send the price of gold to $ 10,000 10Nov2016
Gold prices and dates are the same as in the example above. With gold where it was ten months ago, when could we expect some progress towards that price target?
Strange price predictions usually focus on the collapse or collapse of the monetary system. The collapse occurs as a result of the complete rejection of the US dollar after decades of depreciation. People simply refuse to accept and hold U.S. dollars in exchange for the goods and services offered.
Now suppose you own gold at that time. Would you sell it? At what price? For how many worthless US dollars would you part with an ounce of gold?
If someone offered you a billion monopoly dollars for an ounce of gold today, would you take it? How about ten billion?
Okay, so what if we see a sharp drop in the value of the US dollar in the next few years? Let’s say a drop represents a loss of purchasing power for the dollar of fifty percent compared to the current level. That would equate to a gold price of approximately $ 2,500.00 per ounce, which is twice as much as the current level.
This is true if the gold and the US dollar are currently in equilibrium (I think they are). In other words, the current price of gold of 1250/60 dollars is an accurate reflection of the cumulative fall in the value of the American dollar since 1913.
A fifty percent drop in the purchasing power of the U.S. dollar would be reflected in higher prices of other goods and services; a pattern that has become too familiar over the past hundred years.
If there is a functioning market, and assuming you sell some gold and make a profit, how much more will it cost anything else you decide to buy? Do you really think you will be able to buy other valuables at ‘discounted’ prices at that time?
Gold in 1913 was $ 20.00 per ounce. It is currently $ 1260.00 per ounce. That is an increase of more than sixty times. But that doesn’t represent a profit. Because the general level of prices of goods and services today – generally speaking – is sixty times higher than it was in 1913.
There are times when in short-term situations you can profit from sharp moves in gold. In general, these are just before the large movements in the price of the US dollar that reflect the realization of the cumulative decline in the purchasing power of the dollar. And, to a lesser extent, recognizing when the expectations of others bring the price of gold far above equilibrium against the U.S. dollar.
In 1999/2000 gold reached a low price of $ 250-275.00 per ounce. Shortly thereafter, it embarked on a decade-long culmination that culminated in a top price tag of close to $ 1,900.00 per ounce in 2011.
After peaking in 2011, gold fell to a low of just over $ 1,000.00 an ounce over the next five years. The short-term recovery in early 2016 returned it to approximately the current level ($ 1250-1350.00), where it generally remained without a fall or a fall to a significant extent.
Where were all these ‘experts’ in 1999/2000? And what did they predict then?
And from 2011/2012? They say almost the same thing over and over again. Buy now! Buy more! Before it’s too late!
One day it will be late. But it is now a matter of financial survival more than ever before. The obsession with profit, forecasting and trading has obscured the real foundations.
And one way or another, most people’s profits are likely to smoke before they do anything significant with them.
Gold – physical gold – is real money. It’s real money because it’s a stock of value. And its value is constant. The value of the US dollar continues to decline over time. The value of the US dollar, which is constantly declining, and people’s perception of it, as well as their expectations of it, determine the price of gold.