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After stellar years for both gold and silver, what prices will precious
metals hit in 2011? Here's an analysis based strictly on their price behavior
in the current bull market.
First, take a look at the annual percentage gains that gold has
registered since 2001 (based on London PM Fix closings):
Excluding 2001, the average gain is 20.4%. Tossing out the additional
weak years of '04 and '08, the average advance is 24.8%.
So we can make some projections based on what it's done over the past 10
years. From the 12-31-10 closing price of $1,421.60, if gold matched…
- The average rise this decade, the price would hit
$1,711.60
- The average rise excluding the three weak years =
$1,774.15
- Last year's gain = $1,858.03
- The largest advance to date (2007) = $1,875.09
But what if global economic circumstances continue to deteriorate? What if
worldwide price inflation kicks in? And what if government efforts at currency
debasement get more abusive? If Doug Casey is right, a mania in all things
gold lies ahead – what if that begins in 2011? Here's what price levels
could be reached based on the following percentage gains.
- 35% = $1,919.16
- 40% = $1,990.24
- 45% = $2,061.32
- 50% = $2,132.40
- 1979's gain of 125.7% = $3,208.55
It thus seems reasonable to expect gold to surpass $1,800 this year, as well
as reach a potentially higher level since the factors pushing on the price
could become more pronounced.
Here's a look at silver.
As you can see, silver had its biggest advance in 2010. The average of
the decade, again excluding 2001, was 27.5%. And also tossing out the '08
decline, the average gain is 34.3%. So, from the 12-31-10 closing price of
$30.91, if silver matched...
- The average rise this decade, the price would hit
$39.41
- The average gain excluding 2008 = $41.51
- Last year's advance = $56.22
- The 1979 gain of 267.5% = $113.59
So, $50 silver seems perfectly attainable this year. And that's without
monetary conditions worsening.
It's titillating to ponder these advances for gold and silver, especially
when you consider we might be getting close to the mania. And if we are, that
should do wonderful things to our gold and silver stocks, too.
I would add one caution: the odds are high that there will be a significant
correction before gold begins its march to these price levels. In every year
but two ('02 and '06), gold fell below its prior-year close before heading
higher. And here's something to watch for: in every year but one ('08), those
lows occurred by May.
In other words, a buying opportunity may be dead ahead. And if you buy on the
next correction, your gains on the year could be higher than the annual
advance.
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Are you satisfied with the amount of bullion you own if monetary and
fiscal circumstances deteriorate? Are you prepared to profit from the mania
in precious metals that Doug Casey projects is
ahead? If not, start the year right with a risk-free trial to BIG GOLD,
where we list the safest dealers to buy physical metal and the best stocks to
profit from the ongoing bull market. Check it out here.
Jeff Clark
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