Labor Day 2011 and you can put down this prediction by Sebastian. I believe he is correct and the reason for this is all the talk about gold being in a bubble. When discussing aspects of life one must remember that everything has a range to it. If your favorite ballplayer is hitting below .250 and he is a lifetime 300 hitter, well, he is due to get hot and go from this low range to his normal level which while doing, he will perform at a even higher level. In the stock market charting affords you a quick viewing of a stocks performance and candlestick's give you a even better perception of near term expectations. Both help you decide what range a particular issue is in and moving(its trend). Personally, I like to include fundamentals to the technical to direct my investment dicisions.
Why Gold?
Now, let us talk about gold. The fundamentals should be well known by this time. It is written into our constitution as our money which is violated by the Fed who has repeatedly flooded the market with paper devalueing the purchasing power of our dollar. The other aspects of gold as an investment, jewelery and commercial are more individual choices and I do not include them in my fundamental reasoning.
40th Anniversary
The technical aspects of gold is how I reached the conclusion of $5,000 gold. It is the percentage range of this commodity. If you look at the historical range when the US was on the gold standard and you could convert your dollars for gold(this is the 40th anniversary of the Nixon Shock)in August 1971, gold was artificially fixed at $35 per ounce. When it was freed, it zoomed to over one hundred dollars and continued to rise during the 1970s, beginning a bubble stage in 1979 that saw gold reach $850 an ounce in 1980 before crashing down. Now, if you divide 850 by 35 you get 24.2 times growth exceleration.
Gold began this climb from a price point of $203 per ounce. If you multiply the above figures you reach the predicted price. It will happen.
What (k) price today
For the correct value at this time one needs to look at the most important commodity to gather a price. What, you ask? OIL!
I worked at a Hess station when the first oil embargo struck. Gas went from .31 cents-per-gallon to .61 cents overnight. Today, I'll use a figure of $3.61 per gallon. The range correllation says that the price of gold should be $2,436 per ounce. We got a long way to go before we hit the bubble stage. If you don't like Sebastian's oil model use a candy bar, up 15 times. How about the greatest car ever built for the money, the 1965 Ford Mustang. It sold for $1999 then, and now $24K give or take. How about electricity? Do anything that you are comfortable using, the results speak for themselves.
The Times, Altucker and CNBC
The New York Times missed the dot.com crash. It missed the housing bubble, but it has all its guns shooting at gold saying that it is in a bubble. Folks, gold could correct to $900 per ounce and still be in its uptrend. Do not let the media which backs the Fed rob you of the profits that gold will give you. And then there are the shills like James Altucker who stated,"gold is just another fiat currency." This ding-dong does not even know the difference between paper(fiat) and gold(commodity) which limits debt. It reminds me that Ron Paul recently asked Chairman Bernanke if gold was money? He said, "NO!" Finally, another clown on CNBC, I forgot his name and it does not deserve to be remembered, stated that gold is in a bubble. I hope that they mention this article and pick on me because I could use the publicity.
LIARS and CROOKKS: This week goes to Professor Haresh Sapea of the University of Chicago Booth School of Business. He wrote an article that stated that more transparency in accounting which means more truth is harmful to the stock market because it will distort it. Yeah, it will bring evaluations to their proper level and for that moment add volativity to the market until the correct level is attained. According to this professor a little lie won't hurt. ...and I can't get my book published. Right!
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