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How High Can the Gold Price Go?

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.

DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.