Posts Tagged ‘gold values’
Interview with Jim Rickards on ITM Trading Website
In this 11 minute interview with Jim Rickards, Senior Managing Director for Market Intelligence at Omnis, Inc. and President of ITM Trading Inc a precious metals dealer in Arizona, Mr. Rickards reveals how he comes up with his prediction of gold pricing reaching as high $11,000 per ounce.
Mr. Rickards answers the first question by saying that he prefers a strong dollar with gold backing but to him it is clear that the government is going in the opposite direction by cheapening the value of the dollar through money printing. Therefore it makes sense to look for alternatives to the dollar, but when you begin to look around for an alternative nothing looks good except for gold. Would you want Euros or other fiat currencies? With everything that is going on in the world economic picture I think not.
When you look at supply and demand fundamentals on gold and then look at gold from the perspective of macroeconomic view, gold becomes the only real option, thus Mr. Rickards believes at one point gold will become the only acceptable form of money.
When people say to Mr. Rickards that there isn’t enough gold in US to back the dollar, he simply states that it is not a function of supply, but at what price. If gold was set at $1,200 per ounce that would create deflation, so you have to come up with a price that creates balance.
Mr. Rickards says that he believes gold will go to $3,000 to $7,000 per ounce using his calculations. He says “it is a simple 8th grade math equation” using the amount of gold in the US hoard and the amount of money in the system and you can come up with the price. He did note that the current range represents today’s money supply, further stimulus (money printing) will increase the gold price range. The reason for the range is this: it depends on which money supply figure that you use (M0, M1, M3). Mr. Rickards says that if you include the global gold and money supplies that the figure can get as high as $11,000 per ounce.
Jim Rickards is a very well respected economist/analyst who appears on CNBC on a regular basis. I highly recommend that you watch this interview at www.itmtrading.com, you will find it in the right-hand navigation panel.
James Turk sees Gold at $8,000 by 2015
At the 2010 World Mining Investment Conference in London, James Turk opened his keynote by reaffirming his previous prediction that gold will reach $8,000 per ounce by 2015. He bases his predictions on past performance. When asked about where he thought gold would be by the end of this year he responded with $1,800 to $2,000 per ounce.
While his predictions are based on past performance the kicker is that he believes this price increase will be due to the debasement of the monetary system. Rather than an increase in wealth it will be gold keeping pace with inflation as the dollar continues to be printed and the debt continues to grow. He believes that physical gold and silver are the only real money and one true way to preserve wealth in this environment.
James Turk has one thing right for sure and that is gold and silver are the only true money. All currencies world wide have no intrinsic value. Gold and silver have no debt attached to it and are free from liens or encumbrances. Whether or not his predictions on the price will come true, well we will have to wait and see. Turk tends to be one of the more aggressive forecasters on gold prices.
What is the most concerning about his predictions is that the rise in the value of gold will be due to hyper inflationary conditions. That means that our wealth will not increase due to the rising value of gold (for those that own it) but only be maintained. All dollar denominated assets and fixed income products will lose value dramatically. So the message here is buy gold and silver in order to preserve what you have spent years building.
Gold as a Store of Value
Gold has been around for over 5,000 years. It has been treasured by individuals, kings and civilizations for its beauty and intrinsic value. It has been used for trade and as a currency for many years throughout history by many different countries. Gold has always been used in jewelry and for artistic purposes. But the main point is, it has always been a store of value and always will be.
Gold’s value comes from its rarity. Anything that is sought after that is rare is valuable. In fact, some estimate the world pours more steel in an hour than it has poured gold since time began. All the gold in the world could be compressed into a 20-yard cube, which is about 1/9th the mass of the Washington Monument.
This financial storm has created a lot of demand for gold, just like many other financial crises have. As demand heats up the values rise. This is a simple rule of economics. However, because gold is of limited supply, its values will rise faster than that of something that can be massed produced. It should be noted that more gold is added to the market every year through mining, but peak gold production has been achieved. A mining company used to be able to extract 12 grams of gold from 1 ton of ore. Now the average is 3 grams per ton of ore.
People always wonder if gold will ever be worthless. It has never been worthless, and I do not believe it ever will be. It is the first true money. It cannot be printed into oblivion and it cannot be destroyed. Thousands of currencies have failed over history, but gold has stood the test of time. It is truly the choice for a store of value.
Gold Outlook for 2010
At the beginning of every year the “experts” come out with their predictions on the precious metals market. These predictions vary every year in their overall gold price target and timing, and should be taken as an estimate, a guide for your strategy. Never the less what is being predicted for 2010 is very exciting for those who own gold or may consider to buy gold coins this year.
James Turk
James Turk is well known for his predictions in the precious metals market. Since the 1970’s people have followed him religiously, in order to guide their decisions in the gold market. Mr. Turk got the price target for 2009 correct. He stated that gold would break $1,000 per ounce and hold above it into 2010. He is calling for gold to break $2,000 per ounce in 2010. The timing is not clear, just that it will break $2,000 this year. He also calls for a floor under gold of $1,050 per ounce, which is the price at which India bought 200 metric tonnes from the IMF at. He also states that we are in the second phase of a three phase bull market.
Rob McEwen
Rob McEwen is the chairman and CEO of U.S. Gold, a gold mining company. He was recently seen on Bloomberg and stated that he believes that gold will go to $2,000 per ounce this year and that it will go to $5,000 per ounce between 2012 and 2014. He states that this is due to the U.S. government printing dollars at an alarming rate and a lack of supply to meet worldwide demand.
Frank Holmes
Frank Holmes is the CEO of U.S. Global Investors. He states on Market Watch, that gold could break $2,300 per ounce which is its inflation adjusted high of $850 per ounce in 1980. He believes that this will be due to a shrinking supply of gold and worldwide inflationary pressures. He does not say exactly when this will occur, but that he believes that it will occur.
There are many more predictions that you can find if you search for them. Even Merrill Lynch is predicting higher gold prices for 2010. This is encouraging news for those that own gold or are considering entering the market today. If someone bought gold today at $1,133 per ounce and it went to $2,000 an ounce by the end of 2010, that would be an increase of 76%!
Gold and the US Dollar
Gold and the U.S. Dollar were pegged for much of our history as a country. We started minting gold coins as currency in 1795, which were interchangeable into paper dollars. We stopped using gold coins as currency in 1933 when president Franklin Delano Roosevelt called in all gold bullion in order to revitalize the economy during the great depression. At the time of the confiscation gold was pegged to the dollar at $20 per ounce. After the confiscation was completed the government revalued gold at $35 per ounce, thus robbing the wealth of all paper dollar holders by 42%.
Gold remained pegged to the dollar at $35 per ounce until 1971 when Nixon closed the gold window and removed us from the gold standard all together. It should be noted that from 1933 to 1974 it was illegal to own gold bullion, but one could own numismatic gold as it was excluded from confiscation.
The dollar and gold were then allowed to free float as it does today. Some of the gains and losses in gold on a day-to-day basis can be attributed to the U.S. dollar but some of it comes from predominant buying and selling.
Gold and the dollar fluctuated in step with each other until June of 2005. Prior to this date if the dollar was down gold was up and vice versa. In June of 2005 gold and the U.S. dollar decoupled from each other, and since then gold and the dollar have risen and fallen together and sometimes moved in opposite directions. They are not directly tied to one another. However, if the dollar decreases in value, the gold price in terms of dollars will rise. For example, gold today is up $18.60 as of this writing, and the dollar is down .15 to 77.48. Out of the $18.60 increase, $2.10 is due to a declining dollar and $16.50 is due to predominant buying.
As time goes on we fully expect the dollar and gold to function as two separate currencies. However if the U.S. has to return to a gold standard, gold will once again be pegged to the dollar.