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Posts Tagged ‘performance’
Rob McEwen comes out with his Projections on the Gold Market
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Rob McEwen, Chairman and CEO of U.S. Gold and founder and former CEO of Gold Corp the second largest gold producer in the world was interviewed by Bloomberg on January 12th 2009. He has been on the record since March of 2006 saying that gold will reach $2,000 per ounce by the end of 2010. He also states that he believes that gold will hit $5,000 per ounce somewhere between 2012 and 2015.
He sites as his reason for this rapid run up in the price of gold will be due to the governments around the world printing money at a high rate. Mr. McEwen thought that the bull market would have ended by now, but people are starting to see gold as money, a currency that trumps all others. This new demand has fueled the fire further than he thought it would. He is so strong on gold rising that he advises that gold mining companies do not hedge.
In my opinion, Rob McEwen could be right. Gold is in a bull market, and typically bull markets end with a blow-off top in the third phase. We have not seen that third phase yet, so we could see very sharp and dramatic price increases during that time frame. It is undeniable at this point that the U.S. Government is printing money at an alarming rate. Some experts speculate that they have doubled the money supply in under a year’s time. Anytime money printing is done in this fashion it puts extreme pressure on inflation which in turn puts upward pressure on gold. Look at what gold did in the 1970’s, when inflation was running high, gold grew from $35 per ounce to $850 per ounce.
All assets run in cycles so we very well could see gold hit $2,000 per ounce this year. I think it will depend on how the economy performs this year and how much confidence is instilled in the American people. Many have said that the hole has been dug and that the dollar will ultimately collapse like all other fiat paper currencies have. If that is the case gold could go much higher than even $5,000 per ounce. But let’s hope that doesn’t happen, because if it does we are in a lot more trouble than any of us want to be.
Can I Profit from Owning Gold Coins?
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It is first important to distinguish between bullion and rare gold coins, which you can read more about in this blog or click on the rare gold coins link. Owning gold coins for long-term appreciation has proved to be lucrative in the past. It fact PCGS, one of the top two grading companies in the world has documented rare gold coin performance since 1970. They claim in their mint state rare gold coin chart (which is an index of coins) that since 1970 a $1,000 initial investment would be worth roughly $115,000 today. When comparing this chart to the DJIA (Dow), mint state rare gold coins have outperformed the Dow close to 11 to 1. You can do this calculation yourself to check out this comparison.
Rare gold coins have been accumulated by investors and collectors alike for many centuries and some collections have been documented as performing very well. Check out these examples:
1. Harold Bareford reportedly bought a collection of American gold coins for $13,832 in the early 1950s which was resold at auction in 1978 for $1.2 million.
2. Louis Eliasberg, built a collection that cost approximately $300,000. In 1982, it sold for $12.4 million at auction.
You can see that rare gold coins have performed well in the past, and it should be noted that past performance is no guarantee of future performance. We are currently experiencing a bull market for gold. Gold has gone from $252.85 in August of 1999 to $1,113.20 where it is now, at the time of this writing. That is a 340% increase in ten years. Gold bull markets make all gold boats float higher, and as a result we have seen rare gold coins perform very well and I fully expect them to go even higher as we enter the final or third phase of the gold bull market.
The third phase is the speculative or panic phase. This is where everyone wants in and everyone is putting their money into the asset driving prices above its fundamental value and usually very rapidly. We have not seen this third phase yet in gold and I believe it is still a few years out before we will.
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