Monday , 15 July 2019


More of the Same: Gold Will Go To $3,000 – $5,000/ozt Over Next Few Years

Thomas Kaplan, in an interview with David Rubenstein on Bloomberg’s Peer to Peer Conversations maintains, based on the facts we have today, that the long wave in gold will take it up to between $3,000 and $5,000 per troy ounce over the next few years.

[As the table below illustrates:]
  1. Gold has produced positive returns in 16 of the last 19 years.
  2. Gold’s average annual return compounded since 2001 is 9.38%.
  3. Gold’s appreciation thus far in 2019 (through 6/20/19) is 8.42%.

[In addition,]
  1. Gold has been a portfolio stalwart.
    • A $100,000 investment in gold in January 2001 would be worth about $350,000 today.
    • At gold’s peak in 2011, it would have been worth about $475,000.
  2. Gold does not have a political preference – something to keep in mind as we approach another presidential election year.
    • Its ascent has occurred during the terms of four presidents – two Democrats (Bill Clinton and Barack Obama) and two Republicans (George Bush and Donald Trump).
      • Its largest gain – 31.92% in 2007 – came under a Republican (Bush).
      • It’s second largest gain – 29.24% in 2009 – came under a Democrat (Obama).
  3. Gold is not swayed by who leads the Federal Reserve.
    • Its ascent has occurred during the terms of four different Fed chairmen with four distinctly different styles and approaches to monetary policy – Alan Greenspan, Ben Bernanke, Janet Yellen and Jerome Powell – and under a variety of economic circumstances and events.
  4. Contrary to popular belief, gold does not need inflation to appreciate in value.
    • In 2001 the average inflation rate was 2.8%. In 2018, it was 2.4%. Between those bookend years, the inflation rate exceeded 3% only three times. Its lowest reading was 0.1% in 2015.
    • In short, some of gold’s best years were the result not of inflation but disinflation – a stubborn circumstance that has carried over to the present.
  5. Gold’s price history is only loosely connected to that of the dollar.
    • In January 2001, the U.S. Dollar Index stood at 113.39. It now stands at a little over 96 for a decline of 18% during the period. The price of gold on the other hand rose 3.5 times.
    • The disconnect between the two statistics undermines the long-held belief that there is a strong negative correlation between the two savings instruments.
  6. The 21st century has been gold’s century, not the stock market’s.
    • In January 2001, the Dow Jones Industrial Average stood near 16,000. It is now bumping up against the 27,000 mark for a gain of roughly 69%.
    • By contrast, gold is up 350% over the same period (from roughly $400 to $1400 per troy ounce). While stocks dominated headlines, gold quietly performed.
      • At $5,000, by the way, the appreciation from the current $1400 price would amount to roughly 350%.

gold has beaten the S&P 500 Index so far this century

Conclusion

The question becomes whether or not an investment that has performed so well in the past is likely to perform equally well in the future. Though nothing in the world of finance and economics is certain, we rest the bullish case for gold on the understanding that none of the economic and financial system problems that created a positive price environment for gold over the last nearly nineteen years have been removed from consideration. In fact, a case could be made that they have only intensified – and dangerously so.

Editor’s Note: The above excerpts from the original article by Michael J. Kosares (USAGold.com) have been edited ([ ]) and abridged (…) for the sake of clarity and brevity. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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