One kilogram gold bars are displayed for a photograph at the YLG Bullion International Co. ... [+]
© 2016 Bloomberg Finance LPGold prices have just smashed through the previous all-time record high around above $1,920 a troy ounce which was set in 2011. Bullion was recently fetching $1,942.
The rally is almost certain to continue for at least a while. But some gold bulls may have gotten a little too exuberant. Some see it going as high as $10,000 an ounce. Even if that does come to pass, don't expect it to last even as long as a day.
Gold Bulls Gone Batty?
These mega-bulls forecast prices getting anywhere from $3,000 to $10,000, according to a recent report from New York-based commodities consulting company CPM Group. The report doesn't name the forecaster(s), but it does cast doubt on the likelihood of their projections materializing in a way that is useful for investors. The report sums it up as follows:
- [...] these gold bulls have been predicting since at least the 1970s that economic and financial excesses would lead to a global financial collapse and gold prices rising to $5,000, $10,000... whatever. They have been wrong on their economic outlook and their gold price projections for nearly half a century. At what point does one say to oneself, "Maybe I should stop listening to people who have been wrong for 30, 40, 50 years.?"
In other words, with gold just having smashed a record we can expect exuberance. Still, excessive forecasts should be dismissed as useless as the basis for a long-term investing strategy.
What might happen, in an extreme example, is that gold hit $10,000 an ounce fleetingly before falling back swiftly, says Jeff Christian, managing partner of CPM Group.
He uses the example of gold settling at $825 in on Monday, January 21, 1980. The price had hit $850 during that day. It didn't regain that level for decades.
A day later, Tuesday January 22, 1980, the price had fallen to $682, Christian says.
That's a huge percentage drop in price for a single day.
In short, what he is saying is that yes we could reach a really high gold price, but it will likely be gone in a New York minute.
What Can You Reasonably Expect?
First, it's important to understand that when an all-time high gold price gets breached, we can expect a significant further rally.
"Every time we did that, the price went well beyond it and it then it got very speculative," says George Milling-Stanley, chief gold strategist at State Street Global advisors.
In simple terms, the current rally will continue onwards in a normal way, before it starts to turn into a speculative rally. Such speculative phases or spikes often mark the end of the run-up. The 1980 incident would be a good example of that.
Milling-Stanley sees the price first going beyond $2,000 an ounce.
Similarly, Ross Norman, CEO of MetalsDaily.com forecasts that the price would reach a high $2,080 this year.
That's a far cry from the $10,000 some see coming. Norman says for such prices to materialize the world would need to be in a much worse state than it is currently.
"Clearly for those living at the extreme end of the forecasts then they envision a world quite different than the one we are living in now," he says. "And I just don't see that now."
The Link LonkJuly 27, 2020 at 11:36PM
https://www.forbes.com/sites/simonconstable/2020/07/27/if-you-think-gold-prices-will--climb-to-10000-forget-it/
If You Think Gold Prices Will Climb To $10,000, Forget It - Forbes
https://news.google.com/search?q=forget&hl=en-US&gl=US&ceid=US:en
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