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5 Reasons Gold Will Set an All-Time Record In 2013

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Published : March 18th, 2013
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Category : Editorials

The Golden Age Comes To Mankind
 Only After They Have Re-discovered Gold's Value

5 Reasons Gold Will Set an All-Time Record In 2013

No two bull markets are ever exactly the same and gold is no exception. During the last secular gold bull market in the 1970s, gold rose from $35 in 1968 all the way to $200 by late 1974. Then completely unforeseen the unthinkable happened. Between late 1974 and mid-1976, gold prices were cut in half, dropping from about $200 to $100. At the time, many Gold Bugs sold out in fear & disgust. But then the unimaginable happened again; Gold prices started to climb and climb, rising from $100 in mid-1976 all the way to $800 by January 1980. Anyone who bought gold at $35 earned better than 20 times their investment. But most of that rise occurred in just the last two months of 1979.

Since 2001, gold has been the single best performing asset for a record 12 straight years. In fact, the average return on gold was just shy of 18%/year.

 

I know of no other major asset that has turned in this kind of performance ever. This is what a stealth bull market looks like, one that I fully expect will keep powering on since we have another 5 years to go before the blow-off top of $6,250 by 2017 (My 2005 projection).

2013 Gold Price Forecast

Gold began the year at $1,600 an ounce. Should we get average returns in this calendar year as well, gold will finish 2013 around $1,880. At those levels, gold prices would begin 2014 just shy of the all-time high set last year, right around the $1,900 mark. On the other hand, if we assume an average return again this year, then gold could reach $2,227 or better in 2013. After all, none of the fundamentals supporting gold prices have gone away. Instead, they've only continued to gain strength. Listed below are the five factors I've identified that will power the Gold Bull Market upwards for FIVE years or more:

  • The Feverish Growth of Fiat Money: The USA, Europe, China and most of the developed world is printing money much faster than the amount of new gold being mined or discovered. Runaway money printing presses are always bullish for gold.
  • The Feverish Demand For Gold: As central banks continue to print, individuals are continuing to relentlessly buy gold, especially in the world's two most populous nations, China and India, which in 2002 accounted for 23% of world gold demand. Today, just these two nations alone make up nearly half of all demand at 47%. This is just the beginning. Meanwhile, less than 2% of all investment funds are invested in gold. Does that sound like gold is in a bubble?
  • Even Central Banks Have Begun Buying: Central banks, especially RUSSIA and China as well as the developing nations’ Central Banks are buying and hoarding gold at a record pace. It is my belief that China will drastically expand its gold buying year after year on a cumulative basis in an effort to accumulate enough Gold to back the Yuan by at least 25% to 50% with gold in their effort to replace the US $ as the world’s reserve currency.
  • High Demand Meets Short Supply: The other side of the equation is supply. The gold mining industry is struggling to find more gold. The industry as a whole spent a record $8 billion in 2011 to explore for gold and yet their successes for gold discoveries are declining drastically. Bloomberg reported that from 1991 to 1999 there were 40 three million oz. or more gold discoveries, yet from 2001 to 2009 there were only ½ that.
  • My Favorite Reason For $2,400 Gold in 2013: The vast majority of analysts consistently forecast too low and are even predicting declining gold prices farther out. But guess what? They've been consistently wrong for 12 years. Meanwhile, breakeven costs continue to rise meaning the price floor keeps rising. And only the richer discoveries can and will be exploited. That's one reason why I expect gold prices to set a new all-time record price high in 2013, of $2,400.

 


Why My 2005, $6.250/OZ projection for Gold by 2017 Isn't so out of whack

To start with, let's take the 1980 peak price of gold of $850 - and adjust it for inflation. That would take the price of gold to $2,400 in present-day terms. (That is using the Government understated inflation rates). Now, let's take the 2,400% gain that gold experienced during the 1970s and translate it into present-day terms. From the 2001 low of $260.50 an ounce, a 2,400% gain would take the yellow metal all the way up to $6,252 an ounce which makes my 2005, $6,250 rounded projection price by 2017 seem a lot more reasonable today than it was when I first made it in 2005.

But these are not just random price projections. They are both well reasoned and well thought out. If we look at what the fundamentals are telling us, it's clear that gold at $1,650 is a long way from its eventual peak, meaning gold is still very much undervalued: (Primarily due to Government manipulation attempts to hold the price down.)

Five Fundamental Reasons Gold Will Soar

- You Can't Ignore Inflation: Demand for gold as a store of value has surged amid speculation that inflation will pick up after the Fed, the Bank of Japan and the European Central Bank announced plans to buy more debt. This increased new money printing will raise inflation expectations pushing gold to new highs.

That follows a pattern established from December 2008 to June 2011as gold soared 70% following the $2.3 trillion created in the first two rounds of quantitative easing. Now that the Fed has made QE3 & 4 an open ended proposition, commodities in general and gold in particular will undoubtedly edge higher. In fact, since Nixon closed the "gold window" in 1971 the purchasing power of the dollar has declined to a mere 14 cents.

As Milton Friedman once said, "Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless."

- Gold is Real Money: The significant fall in the purchasing power of a dollar only strengthens the case that as a store of value, gold is the only real money. The fact is gold has been a monetary tradition for millennia. Nearly 2,000 years ago, Aristotle laid out what characteristics make for good money. According to Aristotle:

  • It must be durable.It must be portable.It must be divisible.
  • It must be consistentIt must have intrinsic value.
  • So it's no accident that the most common basis for money - in all of human history - has been gold. After all, only gold meets all five of those requirements
  • It is only in the past century that fiat money has supplanted gold or gold-backed currencies on a worldwide basis.Fiat currencies, like the dollar, are just a relatively recent and failing experiment in economics. So much so, it's become exceedingly dangerous to hold to, as long term holders are losing a compounded 10% per year. That's why as many as 13 US States want to issue their own currencies in silver and gold. What's more, Utah has already signed a bill into law recognizing US mint-issued gold and silver coins as an acceptable form of payment. The coins are treated like US dollars for tax purposes and Utah State citizens can now contract to pay each other in gold if they so choose.

-Investment Demand is Exploding:Large institutional investors (hedge funds and pension funds) are making increasingly large allocations to gold, as are individual investors. One of them is Pimco's Bill Gross who said in a recent white paper that gold and real assets would be the only ones to thrive in an acute fiscal crisis. According to Gross, the latest round of quantitative easing made gold "even more attractive" and owning the metal should be considered as part of a diversified portfolio. According to Morgan Stanley's survey of 140 institutional investors in the US, gold sentiment is now at its highest bullish reading since July 2011.Asia, with a population that exceeds 2.5 trillion inhabitants and a long-standing cultural affinity for gold, is stoking global demand in a big way. In fact, China is overtly encouraging its citizens to buy gold and silver, while offering them gold-linked checking accounts to facilitate their purchases. China is primed to overtake India as the world's largest consumer of gold. A quickly developing middle class whose members are experiencing rapid escalations in disposable income are a major bullish driver for the price of gold.

-Central Banks are Loading Up On Gold:According to the World Gold Council, central banks bought 254.2 tons in the first half of 2012 and may add close to 500 tons for all of 2012. What's more, the International Monetary Fund(IMF) says Russia added 18.6 metric tons of gold in July. South Korea bought 16 tons (of #9 coal, LOL); a 30% increase. Kazakhstan increased their bullion reserves for a 12th consecutive month. That shows how gold prices continue to be underpinned by growing demand from the world's central banks. That's important because up until 2009, central banks, who were steady sellers, stopped selling gold altogether and instead became net buyers as a way to diversify away from the US dollar, the Euro and other fiat currencies. Since then, they've settled into a pattern of gold buying that has been a major force behind the surging price of gold. Since central banks are responsible for 16% of the total global gold demand and are increasing their gold purchases. In all, central banks across the globe hold 31,353 tons of gold as reserves. As fiat currencies continue to crumble, investors can expect that figure to rise. (So who has been doing the selling this Year?)

-A Currency Crisis is Looming: Five years into this crisis, the US, Europe, and countless other economies are still struggling. That's why the European Central Bank and the Fed have unveiled plans to fight the crisis and reduce borrowing costs. ECB President Mario Draghi has since announced an unlimited bond-buying program for distressed euro-area nations, while Fed Chairman Ben Bernanke has committed to another round of so-called quantitative easing. And that reality has ignited a crisis of confidence about fiat currencies in the minds of many investors and governments.

Additional sovereign-debt downgrades from ratings agencies are but one potential trigger of a currency crisis. According to an August report from the World Gold Council:

“The ongoing sovereign debt crisis in the Eurozone underpinned European investors’ enduring conviction in gold’s capital preservation properties.Demand for bars and coins from retail investors posted a 15% year on year increase to 77.6t; 19% higher than the five year quarterly average of 65.2t.”

Under such conditions, gold – the ultimate store of value and the oldest existing form of money on earth will soar as investors seek to protect their purchasing power.

-THE THREE STAGES OF A GOLD BUYING MANIA

  • Stage One: Currency Devaluation.
  • Stage Two: Investment Demand.
  • Stage Three: A Culminating Mania-Buying Spree.

We've Yet to Reach the Mania Stage: Where are we now?At the moment, we are half way into stage two which means the mania stage isn't far behind.Stage three is when people from all walks of life start lining up at pawn brokers and coin dealers to buy gold and silver. That's when the public finally becomes aware of gold's progressive rise. It's when we will see a market bubble akin to what we saw with "dot.com" stocks back in the late 1990s, or US stocks in late 2007 and the Gold and Silver markets in 1979-80.

As the mania sets in, higher prices by themselves, beget higher prices, with gold rising in the kind of near-vertical climb that is the hallmark of a speculative mania - a bubble. This is when and where the $6,250 price target will most likely be reached.

Please Note: A team of economists believe gold could shoot even higher than $5,000 due to a frightening "pattern" seen in our debt and money supply that guarantees they're going to fail.


There's no mania until you witness a gold mania and despite the fact that we've been in a powerful Gold Bull Market for more than a decade, I believe the best is yet to come for gold and silver prices."


SO WHY SHOULD YOU INVEST IN GOLD?

Have you ever stopped to ask yourself why, if the economy is as strong as the government claims it is, they’re still printing money and piling on the debt as if it was going out of style? This is not the sign of a healthy fiscal and monetary system. And it’s not just the US Government; Governments the world over are debasing their currencies by lowering interest rates and many have resorted to “quantitative easing,” a fancy term that means nothing more than printing money. In the US, the number of dollars in circulation has tripled since 2008, while worldwide; M2 money supply is up in all G7 countries.

As the cry to cut government spending may be reaching a crescendo, the politicians including the President are NOT listening. The “official” deficit for 2012 was estimated at $1.1 trillion, although in reality it was much higher when you consider our unfunded liabilities. Total US debt at the end of 2012 was an understated $16.4 trillion

How has gold responded to all of this? In the four years between January 2009 and January 2013, gold was up 90%, while the S&P 500 rose 53%.

HOW NOW DOW

I am still bullish for the very short term expecting one more spike rally, which will then be quickly reversed. When that occurs, it will suggest that the 1st of the final 3 waves (a,b,c) rally from November 2012 has topped. That spike rally should occur sometime over the next week or two, coinciding with March 1st, 2013 scheduled phi mate turn date, which as it seems should be a TOP. There is growing evidence that a short term top is approaching, to be followed by a sharp decline of between 5% to 10%. That decline will sucker most everyone into thinking that the markets are starting an overdue massive selloff. But in my opinion, it will only be wave b-down of the a-up, b-down, c-up rally for the final wave that will complete the multi-decade “Jaws of Death” pattern. Then the final up wave will convince everyone that all is right with the world, taking the Industrials toward 15,500, the upper boundary of the Jaws of Death pattern creating a false sense of security and euphoria. Once the Jaws of Death Pattern is completed, it will mark the end of Elliott Wave’s GRAND SUPPERCYCLE 5th and final wave of the multi-century 5th wave up: Springing the TRAP shut. A massive CRASH will then begin and last several years and will be worse than anything that has been seen in a century - Grand Supercycle degree wave {A} down will have begun.

PRECIOUS METALS

Gold and mining stocks are putting in a bottom that will lead not only to a strong rally, but will set the stage for a resumption of the Bull Market for gold and silver bullion to be followed by their respective securities.

The Weekly Full Stochastics for gold and silver are at levels where strong rallies started over the past five years. The coming rally will be identified by new buy signals given inthe HUI and 30 day Stochastics.



GOOD LUCK AND GOD BLESS

We are into the most trying times in our nation's history. We can either succumb to our Government’s folly and go down with the ship or take actions to personally prosper. As always, the choice is yours.

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Please Note: This article is for education purposes only and is designed to help you make up your own mind, not for me to make it up for you. Only you know your own personal circumstances so only you can decide the best places to invest your money and the degree of risk that you are prepared to take. The Information and data included here has been gleaned from sources deemed to be reliable, but is not guaranteed by me. Nothing stated in here should be taken as a recommendation for you to buy or sell securities.


Data and Statistics for these countries : China | India | Japan | Kazakhstan | Russia | South Korea | All
Gold and Silver Prices for these countries : China | India | Japan | Kazakhstan | Russia | South Korea | All
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Aubie Baltin has spent his career identifying major trends in the markets and helping others to profit from them. He uncovers changes to the major trends in his newsletter, “UNCOMMON COMMON SENSE”, then presents specific, actionable recommendations to help his readers profit before they become obvious to everyone else.
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Great article, but I think you’re far too bearish : ) Here’s a seventh reason : scarcity.

Global gold production is reckoned (by the US Geological Survey) to be about 2,600 tons per year : that’s 83,590,000 troy ounces.
At the current price ($1600) that’s worth $133,744 million.

Meanwhile, the world’s GDP is reckoned at about $70 trillion. The top 1% of wage earners take 10% of that; so their yearly income ($7 tn) is about 52 times the value of all the gold mined.

Even mainstream financial institutions like HSBC and UBS have advised their clients to hold 5%-10% of their money in gold; so let’s imagine that just “the 1%” decide to follow that advice, and attempt to put 10% of their yearly earnings into gold: that would be $0.7 tn of cash chasing $0.133 tn of gold – a ratio of 5.2 to 1 (as the world cannot simply ramp up gold production at will). What should theoretically happen in a ‘free market’ would be that the gold price would go up 5.2 times to compensate, giving a price per ounce of about $8,320.

If the top 5% of global wage earners – who take home 25% of the world’s money, i.e. $17.5 trillion – try to put 10% into gold, that would be $1.75 tn chasing $0.133 tn of gold : a ratio of about 13 to 1. So on that basis, I honestly believe that the price could go to (13 x $1600) = $20,800.

And that’s presuming the rich don’t use any of their *savings* to buy gold...

- Happy investing !

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Not only does your math need some work, you totally ignore the fact that unlike soya beans, for the greatest part, gold does not get used up and so all 170,000 tons of preexisting gold are still available if the price is right.

The article is just so much wishful thinking. You should pay it no mind.

Now bring on those down arrows.

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"Stage three is when people from all walks of life start lining up at pawn brokers and coin dealers to buy gold and silver."

You forgot, they already lined up to sell their old and broken gold. The vast majority are too far in debt to buy even silver. Jeez, many are having problems keeping the lights on.

Those few who still have some liquidity buy elsewhere at a lower premium. And if you look at the US market, there just isn't that many participants in physical compared to other countries that are still nations of savers. Don't forget that Joe Average American always buys as the mania really takes hold and then sells low.
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Here's a 6th reason.

When you pick up a piece of GOLD, be it a coin,a piece of jewellery, a small bar or a kilo bar, there is something which is inherent in mans' intelligence and feel of the tangibility of that metal, which denotes its essence. True beauty and real wealth.
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Funny, i get that when i pick up a banana.
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Most humans will agree with SW, most monkeys will agree with vox.
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A Kilo of gold will buy you about 62500 bananas in Australia.
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That would be a lot of happiness for Vox
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Latest comment posted for this article
That would be a lot of happiness for Vox Read more
Hart - 3/19/2013 at 12:27 PM GMT
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