The gold price sell-off is getting downright ugly.
Down 4% today, gold is now 20% from its September 2011 high, which means it’s in a bear market.
We’ve heard some ultra-bulls say with a straight face that gold was heading for the stratosphere.
For whatever reason, they argued that it could be worth multiples of where it is today. We’ve heard targets from $5,000 to $10,000.
There was even a rationale for gold at $46,000/Oz.
With prices plummeting, we thought it would be a good time to revisit some of the wildest gold price targets we’ve heard in the last year.
'Minimum upside targets are seen to the 6-month range highs at 1789/1803, with potential to the Sep'11 highs at 1921 and a resumption of the secular bull trend that ultimately targets a price of $3000 to $5000 an ounce.'
'...But people are ultimately exiting out of these fixed income assets, this sovereign debt, and they are going to be going into gold. I can see that the Asian demand is still very palpable. In fact it's increased from last year quite dramatically. That is the buyer in the market. The question is, will they (China) be there over the summer months?
'Look, if you were to run M4, M3 numbers, etc, and assert a value to gold on an appropriate metric relative to that, obviously gold would be at stupendous prices. I believe that gold has considerable room to go to the upside, four or five times (Gold price above $6,000). I think that's not an inappropriate suggestion.'
'When we look at the move in 2006/2007, if we follow that trajectory it should take gold up towards $2,400. But we see no reason why this gold trend cannot perform as well as the last bull market in gold between 1970 and 1980. If you replicated that move exactly, it will take gold to $6,300.'
'I will continue to use the Dow/Gold charts to continue to guide me going forward. The USD price of an ounce of gold and the Dow will, I believe, converge at/around 1, at some point over the next 2 years or so. I have extremely high conviction on this. What I am not sure on is whether we converge at 7000+/-, or at 14000+/-. Because I do believe that even Bernanke and Draghi cannot do as they wish and that there are some limits to the recklessness of policymakers, I still lean towards a deflationary resolution at/about 7000 in the next year or two.'
'Applying the Pareto principle to the current gold price, we find a theoretical price target of USD 8,300. If we were to assume that the last trend phase were to start in August 2012 at USD 1,600 and the bull market had begun in August 2001, the parabolic phase would last 29 more months and thus end in spring 2015. The price target according to the 80/20 principle is therefore USD 8,300.'
In the report, SocGen discusses the historical relationship between the price of gold and the U.S. monetary base. The SocGen team writes that 'if gold catches up with the increase in the monetary base since 1920 (as it did in the early 80s), its price would rise to USD 8500/Oz,' adding that just 'to close the gap with the monetary base increase since July 2007, gold would have to rise to $1,900/oz, assuming full transmission from the monetary base increase to the gold price.'
'It wouldn't surprise me if gold eventually goes to $10,000 an ounce or even higher because there is no limit to the productive capacity of central bankers to produce currency. I think it would be more surprising if gold didn't go to $10,000 an ounce. When the US dollar loses its world reserve currency status and the US bond market collapse is in full swing, a $10,000 gold price may prove to be very conservative.
'I think gold cannot be overvalued. There is one individual who, in terms of the backing that would be necessary for the enormous amount of paper that has already been issued, thinks that as of today the amount of gold should be at $15,000 an ounce.'
This isn't Russell's target, but here's how it could get there.
'The US owns the world's greatest hoard of gold. Here's what I think the authorities have to do. They should unilaterally, overnight raise the price of gold to a high value, maybe around $10,000 an ounce. Thus, each dollar would be worth one 10-thousandth of an ounce of gold. This would allow our enormous debt to be paid off with vastly devalued dollars.'
QB maintains a chart of the shadow gold price (SGP). The SGP uses the Bretton Woods calculation for determining the exchange rate linking gold to the U.S. dollar. The calculation is base money divided by U.S. official gold holdings. Here is QB's latest chart. It includes projections of the base money supply through June 2015, assuming the Fed prints $85 billion per month. The SGP soars to $20,000 per ounce.
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