As gold surpassed US$2,000/oz t recently, many raised their 12-mth gold targets to US$2,100-3,000. Some gold bugs are talking about US$5,000-25,000/oz t. Though, these latter predictions usually include a collapse of the monetary system and/or return to some form of gold standard.
If the Global Financial Crisis aftermath is an indication…
- On a monthly basis, S&P peaked in October 2007, then gold was US$797/oz t
- Gold peaked in August 2011 at US$1,826/oz t, a 129% increase
- If 129% were to repeat from the current level, we would pass US$4,400/oz t
If the gold price only compensates for the increase in M2 money
- Gold peaked in August 2011 at US$1,826/oz t
- Since then the US M2 money stock has increased by 94%
- Assuming a 94% increase from the August 2011 peak, we would go north of US$3,500/oz t
So, how high can the gold price go?
It appears that gold passing US$3,000/oz t is fully possible. Previous all-time highs have been set when investors lost trust in the system. For gold to gain another 50%+ there needs to be a catalyst that makes investors believe it’s the end of the financial system or expect very high inflation.
Please note, this is not a target price nor a recommendation, but merely an illustration.
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