The Golden Age Comes To Mankind
Only After They Have Re-discovered Gold's Value
5 Reasons Gold Will Set an All-Time Record In 2013
No two bull markets are ever exactly the same and
gold is no exception. During the last secular gold bull market in the 1970s,
gold rose from $35 in 1968 all the way to $200 by late 1974. Then completely
unforeseen the unthinkable happened. Between late 1974 and mid-1976, gold
prices were cut in half, dropping from about $200 to $100. At the time, many
Gold Bugs sold out in fear & disgust. But then the unimaginable happened
again; Gold prices started to climb and climb, rising from $100 in mid-1976
all the way to $800 by January 1980. Anyone who bought gold at $35 earned
better than 20 times their investment. But most of that rise occurred in just
the last two months of 1979.
Since
2001, gold has been the single best performing asset for a record 12 straight
years. In fact, the average return on gold was just shy of
18%/year.
I know
of no other major asset that has turned in this kind of performance ever. This
is what a stealth bull market looks like, one that I fully expect will keep
powering on since we have another 5 years to go before the blow-off top of
$6,250 by 2017 (My 2005 projection).
2013 Gold Price Forecast
Gold
began the year at $1,600 an ounce. Should we get average returns in this
calendar year as well, gold will finish 2013 around $1,880. At those levels,
gold prices would begin 2014 just shy of the all-time high set last year,
right around the $1,900 mark. On the other hand, if we assume an average
return again this year, then gold could reach $2,227 or better in 2013. After
all, none of the fundamentals supporting gold prices have gone away. Instead,
they've only continued to gain strength. Listed below are the five factors
I've identified that will power the Gold Bull Market upwards for FIVE years
or more:
- The Feverish Growth
of Fiat Money: The USA, Europe, China and most of the
developed world is printing money much faster than the amount of new
gold being mined or discovered. Runaway money printing presses are always bullish for gold.
- The Feverish Demand
For Gold: As central banks continue to print,
individuals are continuing to relentlessly buy gold, especially in the
world's two most populous nations, China and India, which in 2002 accounted
for 23% of world gold demand. Today, just these two nations alone make
up nearly half of all demand at 47%. This is just the beginning.
Meanwhile, less than 2% of all investment funds are invested in gold.
Does that sound like gold is in a bubble?
- Even Central Banks
Have Begun Buying: Central banks, especially RUSSIA and China as
well as the developing nations’ Central Banks are buying and hoarding
gold at a record pace. It is my belief that China will drastically
expand its gold buying year after year on a cumulative basis in an
effort to accumulate enough Gold to back the Yuan by at least 25% to 50%
with gold in their effort to replace the US $ as the world’s reserve
currency.
- High Demand Meets
Short Supply: The other side of the equation is supply. The
gold mining industry is struggling to find more gold. The industry as a
whole spent a record $8 billion in 2011 to explore for gold and yet
their successes for gold discoveries are declining drastically.
Bloomberg reported that from 1991 to 1999 there were 40 three million
oz. or more gold discoveries, yet from 2001 to 2009 there were only ½
that.
- My Favorite Reason
For $2,400 Gold in 2013: The vast majority of
analysts consistently forecast too low and are even predicting
declining gold prices farther out. But guess what? They've been
consistently wrong for 12 years. Meanwhile, breakeven costs continue to rise meaning the price floor keeps rising. And only
the richer discoveries can and will be exploited. That's one reason why
I expect gold prices to set a new all-time record price high in 2013, of
$2,400.
Why My 2005, $6.250/OZ projection for Gold by 2017 Isn't so out of whack
To
start with, let's take the 1980 peak price of gold of $850 - and adjust it
for inflation. That would take the price of gold to $2,400 in present-day
terms. (That is using the Government understated inflation rates). Now, let's
take the 2,400% gain that gold experienced during the 1970s and translate it
into present-day terms. From the 2001 low of $260.50 an ounce, a 2,400% gain
would take the yellow metal all the way up to $6,252 an ounce which makes my
2005, $6,250 rounded projection price by 2017 seem a lot more reasonable
today than it was when I first made it in 2005.
But
these are not just random price projections. They are both well reasoned and well thought out. If we look at what
the fundamentals are telling us, it's clear that gold at $1,650 is a long way
from its eventual peak, meaning gold is still very much undervalued:
(Primarily due to Government manipulation attempts to hold the price down.)
Five Fundamental Reasons Gold Will Soar
- You
Can't Ignore Inflation: Demand for gold as a store of value has surged amid
speculation that inflation will pick up after the Fed, the Bank of Japan and
the European Central Bank announced plans to buy more debt. This increased
new money printing will raise inflation expectations pushing gold to new
highs.
That
follows a pattern established from December 2008 to June 2011as gold soared
70% following the $2.3 trillion created in the first two rounds of
quantitative easing. Now that the Fed has made QE3 & 4 an open ended
proposition, commodities in general and gold in particular will undoubtedly
edge higher. In fact, since Nixon closed the "gold window" in 1971
the purchasing power of the dollar has declined to a mere 14 cents.
As
Milton Friedman once said, "Only government can take perfectly good
paper, cover it with perfectly good ink and make the combination
worthless."
- Gold
is Real Money: The significant fall in the purchasing power of a
dollar only strengthens the case that as a store of value, gold is the only real
money. The fact is gold has been a monetary tradition for millennia. Nearly
2,000 years ago, Aristotle laid out what characteristics make for good money.
According to Aristotle:
- It must be durable.It must be portable.It
must be divisible.
- It must be consistentIt must have intrinsic value.
- So it's no accident
that the most common basis for money - in all of human history - has
been gold. After all, only gold meets all five of those requirements
- It is only in the
past century that fiat money has supplanted gold or gold-backed
currencies on a worldwide basis.Fiat
currencies, like the dollar, are just a relatively recent and
failing experiment in economics. So much so, it's become exceedingly
dangerous to hold to, as long term holders are losing a compounded 10%
per year. That's why as many as 13 US States want to issue their own
currencies in silver and gold. What's more, Utah has already signed a
bill into law recognizing US mint-issued gold and silver coins as an
acceptable form of payment. The coins are treated like US dollars for
tax purposes and Utah State citizens can now contract to pay each other
in gold if they so choose.
-Investment Demand is Exploding:Large institutional investors (hedge
funds and pension funds) are making increasingly large allocations to gold,
as are individual investors. One of them is Pimco's
Bill Gross who said in a recent white paper that gold and real assets would
be the only ones to thrive in an acute fiscal crisis. According to Gross, the
latest round of quantitative easing made gold "even more
attractive" and owning the metal should be considered as part of a
diversified portfolio. According to Morgan Stanley's survey of 140
institutional investors in the US, gold sentiment is now at its highest
bullish reading since July 2011.Asia, with a population that exceeds 2.5
trillion inhabitants and a long-standing cultural affinity for gold, is
stoking global demand in a big way. In fact, China is overtly encouraging its
citizens to buy gold and silver, while offering them gold-linked checking
accounts to facilitate their purchases. China is primed to overtake India as
the world's largest consumer of gold. A quickly developing middle class whose
members are experiencing rapid escalations in disposable income are a major
bullish driver for the price of gold.
-Central Banks are Loading Up On Gold:According to the World Gold
Council, central banks bought 254.2 tons in the first half of 2012 and may
add close to 500 tons for all of 2012. What's more, the International
Monetary Fund(IMF) says Russia added 18.6 metric
tons of gold in July. South Korea bought 16 tons (of #9 coal, LOL); a 30%
increase. Kazakhstan increased their bullion reserves for a 12th consecutive
month. That shows how gold prices continue to be underpinned by growing
demand from the world's central banks. That's important because up until
2009, central banks, who were steady sellers, stopped selling gold altogether
and instead became net buyers as a way to diversify away from the US dollar,
the Euro and other fiat currencies. Since then, they've settled into a
pattern of gold buying that has been a major force behind the surging price
of gold. Since central banks are responsible for 16% of the total global gold
demand and are increasing their gold purchases. In all, central banks across
the globe hold 31,353 tons of gold as reserves. As fiat currencies continue
to crumble, investors can expect that figure to rise. (So who has been doing
the selling this Year?)
-A Currency Crisis is Looming: Five years into this
crisis, the US, Europe, and countless other economies are still struggling.
That's why the European Central Bank and the Fed have unveiled plans to fight
the crisis and reduce borrowing costs. ECB President Mario Draghi has since announced an unlimited bond-buying
program for distressed euro-area nations, while Fed Chairman Ben Bernanke has
committed to another round of so-called quantitative easing. And that reality
has ignited a crisis of confidence about fiat currencies in the minds of many
investors and governments.
Additional
sovereign-debt downgrades from ratings agencies are but one potential trigger
of a currency crisis. According to an August report from the World Gold
Council:
“The
ongoing sovereign debt crisis in the Eurozone underpinned European investors’
enduring conviction in gold’s capital preservation properties.Demand
for bars and coins from retail investors posted a 15% year on year increase
to 77.6t; 19% higher than the five year quarterly average of 65.2t.”
Under
such conditions, gold – the ultimate store of value and the oldest existing
form of money on earth will soar as investors seek to protect their
purchasing power.
-THE THREE STAGES OF A GOLD BUYING MANIA
- Stage One: Currency Devaluation.
- Stage Two: Investment Demand.
- Stage Three:
A Culminating Mania-Buying Spree.
We've
Yet to Reach the Mania Stage: Where are we now?At
the moment, we are half way into stage two which means the mania stage isn't
far behind.Stage three is when people from all
walks of life start lining up at pawn brokers and coin dealers to buy gold
and silver. That's when the public finally becomes aware of gold's
progressive rise. It's when we will see a market bubble akin to what we saw
with "dot.com" stocks back in the late 1990s, or US stocks in late
2007 and the Gold and Silver markets in 1979-80.
As the
mania sets in, higher prices by themselves, beget higher prices, with gold
rising in the kind of near-vertical climb that is the hallmark of a
speculative mania - a bubble. This is when and where the $6,250 price target
will most likely be reached.
Please
Note: A team of economists believe gold could shoot
even higher than $5,000 due to a frightening "pattern" seen in our
debt and money supply that guarantees they're going to fail.
There's no mania until you witness a gold mania and despite the fact that
we've been in a powerful Gold Bull Market for more than a decade, I believe
the best is yet to come for gold and silver prices."
SO WHY SHOULD YOU INVEST IN GOLD?
Have you ever stopped to ask yourself why, if
the economy is as strong as the government claims it is, they’re still
printing money and piling on the debt as if it was going out of style? This
is not the sign of a healthy fiscal and monetary system. And it’s not just
the US Government; Governments the world over are debasing their currencies
by lowering interest rates and many have resorted to “quantitative easing,” a
fancy term that means nothing more than printing money. In the US, the number
of dollars in circulation has tripled since 2008, while worldwide; M2 money
supply is up in all G7 countries.
As the cry to cut government spending may be
reaching a crescendo, the politicians including the President are NOT
listening. The “official” deficit for 2012 was estimated at $1.1 trillion,
although in reality it was much higher when you consider our unfunded
liabilities. Total US debt at the end of 2012 was an understated $16.4
trillion
How has gold responded to all of this? In the four
years between January 2009 and January 2013, gold was up 90%, while the
S&P 500 rose 53%.
HOW NOW DOW
I am still bullish
for the very short term expecting one more spike rally, which will then be
quickly reversed. When that occurs, it will suggest that the 1st
of the final 3 waves (a,b,c)
rally from November 2012 has topped. That spike rally should occur sometime
over the next week or two, coinciding with March 1st, 2013
scheduled phi mate turn date, which as it seems should be a TOP. There is
growing evidence that a short term top is approaching, to be followed by a
sharp decline of between 5% to 10%. That decline
will sucker most everyone into thinking that the markets are starting an
overdue massive selloff. But in my opinion, it will only be wave b-down of
the a-up, b-down, c-up rally for the final wave that
will complete the multi-decade “Jaws of Death” pattern. Then the final up
wave will convince everyone that all is right with the world, taking the
Industrials toward 15,500, the upper boundary of the Jaws of Death pattern
creating a false sense of security and euphoria. Once the Jaws of Death
Pattern is completed, it will mark the end of Elliott Wave’s GRAND
SUPPERCYCLE 5th and final wave of the multi-century 5th
wave up: Springing the TRAP shut. A massive CRASH will then begin and last
several years and will be worse than anything that has been seen in a century
- Grand Supercycle degree wave {A} down will have
begun.
PRECIOUS METALS
Gold and mining stocks
are putting in a bottom that will lead not only to a strong rally, but will
set the stage for a resumption of the Bull Market for gold and silver bullion
to be followed by their respective securities.
The Weekly Full Stochastics for gold and silver are at levels where
strong rallies started over the past five years. The coming rally will be
identified by new buy signals given inthe HUI and
30 day Stochastics.
GOOD
LUCK AND GOD BLESS
We are
into the most trying times in our nation's history. We can either succumb to
our Government’s folly and go down with the ship or take actions to
personally prosper. As always, the choice is yours.
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Please Note: This article is for
education purposes only and is designed to help you make up your own mind,
not for me to make it up for you. Only you know your own personal
circumstances so only you can decide the best places to invest your money and
the degree of risk that you are prepared to take. The Information and data
included here has been gleaned from sources deemed to be reliable, but is not
guaranteed by me. Nothing stated in here should be taken as a recommendation
for you to buy or sell securities.
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