How High Can Gold Go? Much Higher!

27 Jan

How High Can Gold Go? Much Higher!

We’ve spilled more than a little digital ink here recently sharing the views of well-positioned people about how high the price of gold will go this year.  

A quick review:

Author Jim Rickards, says if the authorities let a debt crisis materialize, we can “watch gold soar to $14,000 per ounce or higher, not because they wanted it to but because the system is out of control.”  

A British fund manager has a new call, saying that “a bullish target for $7,166 is both logical and plausible.”  (The Gold Bull is Off and Running!)

One of our favorite forecasts is from Congressman Ron Paul.  Dr. Paul was long the leading gold authority on Capitol Hill.  But we especially note his forecast since it is very unusual for Dr. Paul to make any kind of price forecast.  Congressman Ron Paul thinks gold will double, reaching $3,000 by the end of 2020.  Furthermore, says Dr. Paul, when the big crisis hits, it is conceivable that his prediction of $3,000 gold will prove to be far too modest.  ($3,000 Gold at the End of Next Year!)  

More recently, we’ve shared the forecasts from people at the world’s largest hedge fund, Bridgewater Associates.  Greg Jensen, the $160 billion dollar fund’s Co-Chief Investment Officer told the Financial Times that gold could gain 30 percent this year, as global political uncertainties increase.   That forecast would put gold at $2,000 per ounce.  (The World’s Largest Hedge Fund Says “Gold to Surge!”)

gold and silver investments

We also commented on Bridgewater founder Ray Dalio’s observation that gold would be their top investment “for years to come.”   (Ray Dalio Warns “Cash is Trash” at World Economic Forum)

A lot of informed people are expecting gold to move much higher this year.  A McKinsey & Company consultant expressed the view shared by many of those cited above that ongoing global de-dollarization would be “good for gold.”  Veteran market analyst David Rosenberg said the other day that “gold is the place you want to be.”  Rosenberg said, “There is no such thing as a no-brainer, but this is close!”

Below is a one-year gold chart.  It paints a picture of a market poised to move higher.  You can see that gold broke out last summer (the birth of the bull market).  After consolidation at the end of last year, it has surged higher still.  For those technically minded, gold has broken convincingly over both its long-term (red line) and short-term (blue line) moving average trend lines.

The price movement traced in the chart is a response to objective economic and financial conditions:  De-dollarization.  A new generation of Quantitative Easing.  Unconstrained federal budgets.  Unfunded liabilities.  Trillion-dollar deficits.  Spending crazed politicians.  Monetary flapdoodle like Keynesianism and Modern Monetary Theory.  Negative interest rates.  Spend a few minutes pondering Washington’s behavior, the Federal Reserve’s folly, and fast-changing global financial realities, and we think Rosenberg is right:  Gold is the place to be.  

It’s as close to a no-brainer as we’ll ever see.