$12,000 gold
Sitting down with a quant and hearing them make fun of technical analysts (a.k.a chartists) can be surprisingly funny. Seeing a guy in Dockers with a buttoned collar and a pair of bifocals do the white man’s overbite while bobbing his torso and singing the old Head and Shoulders theme song is surprisingly likely to induce hysterical laughter.
The prediction of famed London chartist Robin Griffiths that gold will possibly hit $12,000 and definitely $3,000 in the least, however, is no laughing matter. Griffiths points to the gold bubble lasting until 2015. I know that it’s not anything new or ground breaking in the prediction department, but anytime that a guy can put Karl Marx and Ben Bernanke within ear shot of each other in an answer I get self congratulatory goose bumps. Even if it is breadline foreshadowing.
Though our current mini rally in the Dollar may dissuade some, Griffiths’ point about champagne bubbles should be well taken by most of us. There are many factors at play right now that are directly and indirectly taking aim at a decrease in speculative activity surrounding precious metal markets. The CME’s recent margin increases on silver contracts is probably the best example, but even unintentional effects such as sell offs by major market movers and shakers have had the similar effect of dissuading the small investor from these markets. Griffiths reminds us that the gold rally may still not be in full bloom.
Naturally, our own eyes should always be the guide to our next step regardless of what anybody has to say. For my part I trust those We Buy Gold! signs popping up on more and more on American streets by the day, more than I do any analyst…a possibly, even myself.
So how high will gold go? Anything in the $2000 range is not unheard of, as we would be roughly talking about early 80’s stagflationary levels, inflation adjusted. But how long afterwards do we hit panic mode? At what numerical point do doomsdayers like me begin withdrawing Ben Franklins for winter bonfires?
Utah has already legalized gold and silver as legal tender, how long before other states follow suit? What’s your exit number for gold? How high do you think it will soar?
EDIT: Sorry, guys but for some reason all the related article links I try pasting come back 404. You can Google "Robbin Griffiths+$12,000 Gold" to get to any of them.
I actually like Robert Griffiths a lot, uses technical analysis combined with market history to make a strong trading thesis. Before gold tops it needs to go through a 'phase transition' where it doubles over a period of a couple of months, like silver just has, the Nasdaq did in 2000 and the Nikkei did in 89/90. So we're not there yet - buy the dips!
Link isn't working for me. Anyone else having this issue?
For the past 200 years, Gold has roughly tracked inflation over the long term.
Gold peaked at $900/oz in 1981. Inflation adjusted, that puts it at perhaps $2000-2500 in 2011 dollars by 2015-2017 if you buy into the 35 year cycle. I expect an average rate of 6% inflation from now until 2016; that puts gold at perhaps $3000-3500 by 2016- followed by a steep steep 1981esque crash down to 1/6th its original value.
Frankly, gold is a speculative commodity, not an investment. Yes, it can have a place in a conservative portfolio- but no more than 5-10%. Gold does not pay dividends or interest; unlike real estate, timberland, oil fields, and farms, it doesn't pay any economic rent. It just sits there and looks shiny. You can't lend it out for industrial processes and get anything more than a pittance. Instead, you generally have to pay to store it.
This stands in stark contrast to other inflation-adjusted investments. If we're really going to buy into the 35 year cycle, a much safer bet is oil. Market technicians always have a saying, "History doesn't repeat itself, but it's good at rhyming." With the unrest in the middle-east and folks particularly unhappy in Iran, some of the smarter technicians will be able to see how history might be shaping up to finish this 35-year-old limerick that started with Iran triggering an oil shortage with the fall of the Shah in 1979.
Agricultual commodities I can see the point in, although long term they are bet against human ingenuity and that has historically tended to be a bad place to be!!!
People buy gold in response to fear. Fear works. I hope there's more fear soon: I have a lot riding on gold!
Well, the difference between a gold mine and agriculturals is that gold mines don't usually turn very large profits and you always have to keep making more discoveries.
Decent cropland can produce about 5-7%/year returns if you farm it yourself; 4% if you rent it out. The best part is that you don't have to discover more farmland every 30-40 years. The only problem is that in the most productive agricultural states, you have to be an individual resident to own farmland. This is great news for folks living in Chicago, cough cough cough, but bad news for Northeasterners.
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