"The Golden Age Comes To Mankind
Only After They Have Re-Discovered Gold's Value"
5 Reasons Gold Will Set an All-Time Record HIGH 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 $35 earned better
than 20 times their investment. But most of that rise occurred in
just the last two months of 1979.
Since 2001, gold has been the single best performing asset for a
record 12 straight years. In fact, the average return on gold was just shy of
18%/year.
I know of no other major
asset that has turned in this kind of performance ever. This is what
a stealth bull market looks like, one that I fully expect will keep
regain its power now that we know the reasons for its contrived
crash in an effort to save the US$ and the vEuro. However I think we
still have another 5 years to go before the blow-off top of $6,250
by 2017 (My 2005 projection) will be reached.
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 $2,227 or better in 2013. After all,
none of the fundamentals supporting gold prices have gone away.
Instead, they've only continue to gain strength. Listed below are
the five factors I've identified that will power the Gold Bull
Market upwards for FIVE years or more:
#1 The Feverish Growth of Fiat Money: The
USA, Europe, China and most of the developed world but also
including a few of the Developing nations are printing money much
faster than the amount of new gold being mined or discovered.
Runaway money printing presses are always bullish for gold.
#2 The Feverish Demand For Gold: As central
banks continue to print, individuals are continuing to relentlessly
buy gold, especially in the world's two most populous nations, China
and India but especially after the Cyprus affair, individuals are
stepping up their Gold and Silver purchases all over the world:
which in 2002 accounted for 23% of world gold demand. Today, just
these two nations alone, at 47% of new Gold mined
make up nearly half of all demand. This is just the beginning.
Meanwhile, less
than 2% of all investment funds are invested in gold. Does
that sound like gold is or was in a bubble?
#3 Even Central Banks Have Begun Buying: Central banks,
especially RUSSIA and China as well as the developing nations’
Central Banks are buying and hoarding gold at a record pace. After
all who wants to hold depreciating US$ that don’t pay any interest?
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.
#4 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 of gold
discoveries, yet from 2001 to 2009 there were only ½ that.
#5 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. Let’s not forget the new fact that more and
more developing countries, in their desperate search for more money
are looking to steal it from producing and or newly discovered mines
in their countries, by reneging on contracts not to mention labor
strikes, all of which serves to reduce supply.
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 $1,350 is a long way from its eventual
peak, meaning gold is still very much undervalued: (Primarily due to
Government manipulation attempts to hold the price down so as to
preserve the value of both the US$ and the Euro.)
Five
Fundamental
Reasons Gold Will Soar
#1 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 print more money
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 2011
as 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 by 86 cents so that now that 1971 $ is only worth 14
cents.
#2 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 on 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 using 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.
#3 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 has 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.
#4 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?)
#5 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
unlimited QE3 &QE4of so-called quantitative easing. And that
reality has ignited a crisis of confidence about fiat currencies in
the minds of many investors and governments. If all that weren’t
enough Japan just announced plans to buy Government and Real estate
bonds to the tune of $1.4 trillion.
Future sovereign-debt downgrades from ratings
agencies are another potential triggers for a currency crisis.
According to 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.” In spite of the Recent Manipulated Crash in Gold and
Silver. Gold and Silver will come back stronger than ever. WHEN ?
I can’t say but SHORTLY!
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.
#6 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 were half way into stage two and the
recent Manipulated Selloff of both Gold and Silver will end up being
only and minor interruption: 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 fully aware of Fiat money’s progressive slide. 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 that a Mania will become obvious.
We are currently witnessing
a stock buying Mania which is not back by solid fundamentals and
therefore is NOT SUSTAINABLE.
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
$10,000 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; but
Governments the world over that 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 technically bullish for the very short term expecting possibly
one more spike rally, which will then be quickly reversed. When that
occurs, it will suggest that the Final rally
from November 2012 has topped. That spike rally should occur
sometime over the next week or three. 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 may 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 16,500 – 17,000, 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 BULL MARKET Springing the DEATH
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 BEAR MARKET 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.
