Calibrating the Prediction
I predicted $1,800/oz for the end of 2011 at the beginning of the year. (We started the year at $1,421, so this was an increase of 27%.) For reference, the table below summarizes the view from a variety of well-known sources, which were all lower. My $1,800 was the outlier on the high side.
| Gold Price Predictions from Last Year | |
| Gold 2011 | |
| Morgan Stanley |
$1,315
|
| Goldman Sachs |
$1,690
|
| Society General |
$1,485
|
| BNP Parabas |
$1,500
|
| Barclays (Q3) |
$1,490
|
| Bank of America |
$1,425
|
| (Source Reuters) | |
| Average |
$1,484
|
| Bud Conrad |
$1,800
|
Predictions help us understand the future, even though they are necessarily fraught with speculation and error. Be cautioned that nobody knows the future precisely, but here I have divulged my methods so you can see how I came to these estimates. Use them with your own judgment.
My conclusion is that we face very serious financial problems ahead. The situation is far more out of control than any previously faced in the United States. I see no way to ever pay off the government debt, and Congress has shown itself incompetent in all things, but especially in applying the brakes to soaring deficits.
Elsewhere, the Federal Reserve has already indicated that it plans to abandon the dollar in favor of printing new money to support the economy and the banks. The combination of both doesn’t bode well for the survival of the dollar.
My fear is that the situation will turn out to be much worse than the historically projected trends referenced above, with the price of gold escalating well beyond the numbers shown. So as we go forward, you can use these benchmarks to see whether we remain on a trajectory to significantly higher gold prices.
Of course, if confidence in the fiat currencies erodes to the point approaching failure, the value of gold denominated in worthless paper approaches incalculable numbers – Zimbabwe-like numbers that would be meaningless.
Summed up, until there are fundamental changes in government fiscal and monetary policies – and a recognition that the sovereign debt is unpayable and therefore needs to be restructured – there is no reason to fear gold pullbacks and every reason to expect even more positive returns in the gold mining stocks that are still catching up to the rapid gold rise.
Even higher prices than mentioned here are possible from the flight to safety out of the euro, the seasonal rise into the new year, and the accelerating action of gold from a shift in sentiment of the investment public to a relatively small market. Gold is by far the best “answer,” and now is still the best time to invest.
[Historically, gold has always been a great inflation and crisis hedge, and today again inflation is eating away at the meager gains many mainstream investors make. Did you know that if your portfolio grew by even 3% last year, you may have actually LOST money? More in this report.]
