I regret that (blush, blush) I must admit to an error in my article of 13 January 2006 in which I calculated a long term price objective for gold of $4,250 and a shorter term price objective of $785.
My error was in suggesting that it was a 5 block reversal point and figure chart that I was using for the calculations whereas it was in fact a 3 point reversal $5 per block chart. This change results in lower price objectives being calculated.
The revised long term calculation is 150 columns x 3 (block reversal) x $5 (value per block) plus the top of the base of $500. This gives us the following long term price objective: 150 x 3 x 5 = $2,250 + $500 = $2,750
The shorter term price objective is calculated by multiplying 13 blocks x 3 block reversal x $5 plus the base of the vertical column of $460. This gives us: 13 x 3 x $5 = $195 plus $460 = $655 for the shorter term projection.
I apologise for these errors and any confusion or inconvenience that these errors may have caused. Interestingly, these changes do not invalidate the main conclusions of the article, which were:
Gold has broken out of a 25 year long base with a top at $500; This base is sufficiently large to support a rise to a very high gold price; This confirms the new bull market in gold; Old parameters for over-bought/over-sold and sentiment indicators will have to be changed to produce valid signals.
Other analysts have different methods of calculating price objectives. That is their prerogative, but this is the way I do it and I do not propose to get into a detailed debate on this subject.
A different, more informative and interesting approach is that adopted by Adam Hamilton in his excellent article "Real Gold Prices?" published co-incidentally also on 13 January 2006. He states that "A dollar today is worth vastly less than a dollar was 25 years ago, the last time gold closed above $550." He then calculates that the $850 peak gold price in 1980 would have to be $2,176 per ounce today to have the same purchasing power.
Alf Field
Disclosure and Disclaimer Statement: The author is not a disinterested party in that he has personal investments gold and silver bullion, gold and silver mining shares as well as in base metal and uranium mining companies. The author’s objective in writing this article is to interest potential investors in this subject to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell any stock, currency or commodity. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions. The author has neither been paid nor received any other inducement to write this article
