It is sometimes frustrating to observe that the focus is on gold price forecasts. The more sensational and spectacular the price forecast, the greater the cacophony.
It is worth looking back at a few of these predictions to help put things in perspective.
TITLE: Forecast $ 6,000 gold and analyze gold mining through visualization January 23, 2012
Quote: “If the current bull gold market had followed the time and scale of the bull market in the 1970s, the price of gold would have reached $ 6,000 by 2014. ”
Gold price January 23, 2012: $ 1679.00 per ounce.
Gold price March 14, 2014: $ 1382.00 per ounce.
Gold price as of December 31, 2014: $ 1181.00 per ounce.
How far from the base can price forecasting be? Gold not only did not reach the target price, but also went 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 $ 1205.00 per ounce.
The problem is not the plausibility of the $ 6,000.00 gold. This is very plausible, and possible; can even probably. However, the forecast was specifically time-oriented and terribly misjudged in terms of direction and timing.
All that is forgivable. If you do not own a subscription service and / or do not give investment advice to other people and do not provide trading advice.
TITLE: JPMorgan forecasts gold at $ 1,800 by mid-2013 February 1, 2013
Quote:“JPMorgan sees gold at $ 1,800 by mid-2013, when South Africa is “in crisis” and “growing” “in a crisis,” Bloomberg reports.“
The price of gold on the date of the title was $ 1667.00 per ounce. Five months later, on June 29, 2013, the price of gold was $ 1233.00 per ounce.
The call for $ 1800.00 gold was a “safe” forecast. Only an eight percent increase from the existing (at the time) level of $ 1667.00 would result in a gold price of $ 1800.00.
But, as in the previous example, the price with revenge went south; this time down twenty-six percent in five short months.
TITLE: Trump won the $ 1,500 signals Gold … November 10, 2016
Quote: “US President Trump’s victory in the US signals $ 1,500 an ounce for gold … in the medium term.”
Gold price November 10, 2016: $ 1258.00 per ounce.
Gold price July 31, 2017: $ 1268.00 per ounce.
Apparently, gold has not seen a “signal” as its current price is almost identical to the price on the day the forecast appeared in print immediately after last November’s election.
And what does the writer mean by “intermediate term”? The larger the time frame, the smaller the value in forecasting. 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 takes more than two years – is it worth the headline with a fat face?
TITLE: Trump will direct the price of gold at $ 10,000 November 10, 2016
Gold prices and dates are the same as in the example above. If gold is right where it was ten months ago, when can we expect some progress in achieving that price target?
More bizarre price forecasts usually focus on the fall or collapse of the monetary system. The breakdown comes as a result of the complete abandonment of the US dollar after decades of depreciation. People simply refuse to accept and withhold US dollars in exchange for the goods and services offered.
Suppose at this time you own gold. Would you sell? At what price? How many unnecessary US dollars would you part with an ounce of gold?
If someone offered you one billion monopoly dollars for an ounce of gold today, would you take it? How about ten billion?
Well, what if we see a sharp decline in the value of the US dollar over the next few years? For example, a decrease means a loss of purchasing power of the dollar by fifty percent from the current level. This will equate to a gold price of approximately $ 2500.00 per ounce, which is twice the current level.
This is true when the gold and the US dollar are currently in equilibrium (I think they are). In other words, the current price of gold at $ 1250/60 accurately reflects the cumulative decline in the value of the US dollar since 1913.
A fifty percent reduction in the purchasing power of the U.S. dollar would be reflected in higher prices for other goods and services; a model that has become too familiar over the last hundred years.
If the market is functioning, and if you are selling gold and making a profit, how much more will it cost everything you decide to buy? Do you really think you will be able to buy other valuables at “discounted” prices at the time?
Gold in 1913 was $ 20.00 an ounce. It is currently $ 1260.00 per ounce. This is an increase of more than sixty times. But this is not a profit. Because the general level of prices for goods and services today – generally speaking – is sixty times higher than in 1913.
There are times when you can profit from sharp gold movements in short-term situations. Typically, this is on the eve of major movements in the price of the US dollar, reflecting an awareness 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 much higher than the equilibrium against the US dollar.
In 1999/2000 gold reached a low of $ 250-275.00 per ounce. Shortly thereafter, it embarked on a ten-year outlook that culminated in a peak price of about $ 1,900.00 per ounce in 2011.
After its peak in 2011, gold fell to a low of just over $ 1,000.00 an ounce over the next five years. The short-lived rebound in early 2016 brought it back almost to its current level ($ 1250-1350.00), where it tended to stay unbroken to a large extent.
Where were all these “experts” in 1999/2000 and what did they predict then?
And since 2011/2012? They repeat almost the same thing over and over again. Buy now! Buy more! It’s not too late!
One day it will be too late. But now it is more than ever a matter of financial survival. The obsession with profit, forecasting and trading has overshadowed the true foundations.
And one way or another, most people’s profits are likely to deteriorate before doing anything significant with them.
Gold – physical gold – is real money. It’s real money because it’s an accumulation of value. And its value is constant. The value of the US dollar continues to decline over time. The value of the US dollar and people’s perception of it, as well as their expectations of it, determine the price of gold.