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What Does $1,500 Gold Really Mean?

Commodities / Gold and Silver 2011 Apr 21, 2011 - 02:26 AM GMT

By: The_Gold_Report


When the price of Comex gold futures kissed a record high $1,500/oz. Tuesday before settling back to the high $1,400s at day's end, and then topped the benchmark in early trading Wednesday, the smack sounded a lot like "I told you so." The Gold Report's expert contributors explain what this milestone means for investors going forward.

On Kitco News, analysts were predicting that the markets would take a breather for profit-taking and evaluation before moving to whatever came next. Afshin Nabavi, head of trading at MKS Finance, was quoted describing a scenario in which profit-taking was contributing to range trading between $1,485 and $1,500/oz. before moving up again. "In every corner of the world, there is something going wrong geopolitically or economically," Nabavi was quoted as saying. "So obviously, the safe-haven buying continues in gold and silver."

Jay Taylor, publisher of Gold, Energy & Technology Stocks and host of the "Turning Hard Times into Good Times" radio program, said 1,500 is just a number and not really a meaningful one because the measuring stick is the dollar, which isn't a stable unit of measure because trillions of them are being created out of nothing by government entities all the time. "It is less about an increase in the value of gold, than a devaluation of the dollar," he said. Based on the games being played with currency in the U.S. and all over the world, he predicted that number will probably continue to climb. "The next big one will be $2,000/oz."

The exact price of gold in dollars may not be as meaningful a number, according to Taylor, as how much an ounce of gold will buy. Based on that number, the nominal price of gold could even go down, but the relative absolute purchase price could continue to rise. "The real price of gold will remain high for a long time to come," he said.

For that reason, Taylor is bullish on gold mining shares. He pointed to surging profit margins of aggregate gold mining shares as proof that gold is a sound investment today and for years to come. "This is the buying opportunity of a lifetime in gold mining shares," he said.

Not everyone is listening, however. Stewart Thomson, a retired Merrill Lynch broker and author of Graceland Updates, wrote on 321Energy Tuesday that while gold has risen from $1,300/oz.–$1,500/oz., the public has actually become less interested in gold and gold stocks because "this is a crisis and greed will play a diminishing role, while fear plays an exponentially increasing role."

The declining dollar in the wake of a Standard & Poor's rating agency outlook downgrade and increasing oil prices signaling possible inflationary pressures was also good news for silver, which hit a 31-year high of $44/oz. on Tuesday. Taylor called it "the poor man's gold" and said it could also hit historic highs as investors flee an unstable paper market.

James West, publisher of The Midas Letter, agreed that the worldwide counterfeiting of money is driving the demand for gold and, in his view to an ever greater degree, silver. "In terms of pure performance, whereas gold has delivered a solid gain of 26.51% in the course of the last year, silver has outshone gold spectacularly, turning in a gain of 123.55%, making it the commodity trade of the year by far." He ventured to say that $5,000/oz. gold and $300/oz. silver could be a reality in the not too distant future.

Roger "Trader Rog" Wiegand, editor of Trader Tracks, had predicted a cyclical high for gold of $1,507/oz. and a yearly high of $1,607/oz. His silver crystal ball shows the metal rising to $45.25/oz., then as high as $51/oz. before people get scared and start getting out, leaving the wise investors to pick up and take it as high as $55.85 this year. "It's all about cycles and time; it's just math," Wiegand said. Still, he didn't think prices would reach these milestones this early in the year. He follows seven indicators and says geopolitical unrest is only one of the factors pushing prices.

An emerging trend over the last year, which he predicts will be even more prevalent by fall, is the breaking away of gold and silver shares from the rest of the stock market. "People want to be in gold and silver and they will stop paying attention to the regular markets," Wiegand said. His revised forever high number pegs gold at $4,400/oz. and silver at $256/oz. Others have predicted even higher highs. Analyst Alf Field has suggested $10,000/oz. and Economist Martin Armstrong has publicly said $12,000/oz.

We, at The Gold Report, will be watching to see if precious metals reach the high bars being set.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

1) Brian Sylvester of The Gold Report conducted this interview. He personally and/or his family own the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Timmins.
3) Ian Gordon: I personally and/or my family own shares of the following companies mentioned in this interview:Timmins Gold, Golden Goliath, Millrock and Lincoln. My company, Long Wave Analytics is receiving payment from the following companies mentioned in this interview, for receiving mention on my website, Golden Goliath, Millrock and Lincoln Gold.

The GOLD Report is Copyright © 2011 by Streetwise Inc. All rights are reserved. Streetwise Inc. hereby grants an unrestricted license to use or disseminate this copyrighted material only in whole (and always including this disclaimer), but never in part. The GOLD Report does not render investment advice and does not endorse or recommend the business, products, services or securities of any company mentioned in this report. From time to time, Streetwise Inc. directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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