– $15,000 Gold:
…
Gold is still the best form of money and proves valuable to investors over time.
This is true whether inflation or deflation prevails.
…
The first bull market in gold ran from August 1971 to January 1980.
The dollar price of gold rallied from $35 per ounce to $800 per ounce. That’s a 2,200% gain in 9.4 years.
The second bull market in gold ran from August 1999 to August 2011.
The dollar price of gold rallied from $250 per ounce to $1,900 per ounce. That’s a 670% gain in 12 years.
:::
The Third Bull Market
The third bull market in gold began on Dec. 16, 2015, with gold hitting a bottom of $1,050 per ounce at the end of the prior bear market. Since then, gold has rallied to about $2,000 per ounce as of today, a 90% gain.
If we take a simple average of the price gains and durations of the two prior bull markets in gold, we arrive at a 1,435% gain over a period of 10.7 years.
Applying that gain and duration to a baseline of $1,050 per ounce beginning in December 2015 leads to a gains projection for this bull market of $15,070 per ounce by August 2026.
There’s nothing deterministic about this model. Actual gains could run ahead of this projection both in time and by amount. Conversely, the bull market could end at any time for a wide variety of reasons.
The prior bull market gains could be annualized to produce a slightly lower average gain per year. Still, the bull market assumptions are moderate since we’ve taken a simple average and not stretched for the higher gain or the shorter duration of the two.
Again, using the history of gold bull markets as a guide, a dollar price of gold of $15,000 per ounce in the next three years is not a stretch.
The Road to $15,000
Finally, a bit of elementary math is helpful in understanding how the dollar price of gold can move to $15,000 per ounce in the next three years. For this purpose, we’ll assume a baseline price of $2,000 per ounce, essentially where gold is today.
A move from $2,000 per ounce to $3,000 per ounce is a heavy lift. That’s a 50% increase and could easily take a year or more. Beyond that, a further increase from $3,000 per ounce to $4,000 per ounce is a 33% increase, another large rally. A further gain from $4,000 per ounce to $5,000 per ounce is a further gain of 25%.
But notice the pattern. Each gain is $1,000 per ounce, but the percentage increase drops from 50% to 33% to 25%. That’s because the starting point is higher while the $1,000 gain is constant. Each $1,000 jump represents a smaller (and easier) percentage gain than the one before.
This pattern continues. Moving from $9,000 per ounce to $10,000 per ounce is only an 11% gain. Moving from $14,000 per ounce to $15,000 per ounce is only a 7% gain. Gold can move 1% in a single trading day, sometimes 2% or more.
At progressively higher prices, we see the same $1,000 gain (it’s real money to you), but the percentage increase is smaller, and the hurdle is therefore lower. As an extreme example, a move from $99,000 per ounce to $100,000 per ounce is about a 1% move; all in a day’s work. Those $1,000 per ounce pops keep getting easier.
In addition, basic supply and demand also support the forecast of higher prices albeit with less specificity.
The lesson for investors is to buy gold now.
…
* * *
PayPal: Donate in USD
PayPal: Donate in EUR
PayPal: Donate in GBP