$5,000 gold – then $10,000. Gold bulls sing from same songbook

(September 1, 2017 - by Lawrie Williams)

Jim Rickards and Eric Sprott – neither are from the truly fanatical end of the gold bull community – both reckon gold is going to $10,000 an ounce – not in the short term, but over time, and they are probably right.  It’s only the timescale which is really in doubt.  One to two years or 50 years – or somewhere in between, or even longer?  But this may be a factor of a fall in the purchasing power of the once mighty U.S. dollar rather than of a rising gold price in real terms.

In the writer’s own lifetime gold has risen from an admittedly controlled $35 an ounce to over $1,900 at one point – a 54x increase - and over 37x to the current price level.  Even a 37x gold price rise from the ca. $1,320 where its stands today would put it at over $48,000 – probably unlikely without some kind of global catastrophe, but at least it puts a rise to a mere $10,000 into context – only around a 7.5x increase from where it is at the moment.  Indeed so far in the 17 ½ years of the current Century gold has risen in dollar terms a little over 4.5 times and a similar rise over the next 17 ½ years would put it at near $6,000 by 2036.  In this context such seemingly mega price increases as those suggested by Messrs. Rickards and Sprott do not seem outside the bounds of possibility, or even probability!

As fiat currencies collapse and die, as history shows they all do eventually, gold is, and has been, a constant wealth protector.  It carries no counterparty risk, although it is not totally risk-free as the price can be volatile in the short term as many gold investors will know to their cost.  But the number of big financial names who carry a degree of gold in their portfolios, regardless of its ups and downs, is legion.  It remains the ultimate insurance against total financial system collapse and has stood the test of time in this context. 

So, should you buy and hold gold?  Yes for the long term, although as a trading option it can be risky.  If you get the timing right, trading gold can make you money, but that also applies to many other investment options too.  However in the current financial climate where most countries are technically bankrupt, especially the USA, it would seem to make holding some of one’s capital in gold an imperative.  The world has never before seen such a reliance on debt – to the extent that unwinding it, without currency collapse , or hyperinflation (two sides of the same coin), is virtually impossible.

History does tend to repeat itself, over and over and it is telling us that there is a time limit to dollar dominance.  The world is moving in that direction and gold, as countries like China and Russia well recognise, will likely play a significant part in global financial restructuring.  Barbarous relic or not, gold has stood the test of time as a global instrument of economic security and it likely will continue to do so for the foreseeable future.