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Gold trading at approx. $1,800 per troy ounce does not surprise me… because short-term traders jump in for the ride…Once they have a fundamental understanding of what the future holds, however, they could be instrumental in driving the price up to $25,000 – or more! Let me explain. Words: 772
So says Robert Wenzel (www.economicpolicyjournal.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has paraphrased below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Wenzel goes on to say:
Greater Demand = Higher Price for Gold
It has often been said that gold climbs with the price level…required to buy a very nice suit…but I think things are about to change…The gold bugs are still in the game, but they have company. Central banks have become net buyers of gold, as have many others. The crises in Europe has caused many overseas to seek gold out and in the United States, the possibility for many new gold buyers emerging is also very strong.
Increasing Inflation = Higher Price of Gold
During the inflation of the 1970’s gold climbed in price but this only really started after President Ford made gold once again legal to own in the United States. It took much of the 1970’s for people to realize that gold was an important inflation hedge. Now, with…that lesson under our belt and with the recent decade-long climb in gold from roughly $250 per troy ounce to $1,800 per troy ounce, most in America understand that gold is a very important inflation hedge. In the old days, if price inflation pushed prices up over a few years by 100%, gold climbed by as much. Based on gold’s present level it should climb to roughly $3,000…
Increasing Inflation + Greater Demand = Dramatically Higher Price for Gold
If the next massive price inflation, however, brings with it a flight away from the dollar as the reserve currency and causes the number of owners of gold in the United States to climb from the current 10% or less to, say, 50%, we should see a huge new demand for gold. Instead of stopping at $3,000 per troy ounce, gold would be a multiple of that price. $25,000 per troy ounce would not be out of the question. It’s possible that the new demand for gold could be so great that an ounce of gold instead of resulting in buying one good suit, could allow you to buy two or three good suits.
Conclusion
The next great wave of price inflation is likely to result in a lot of new buyers beyond just the current gold bugs: stepped-up buying by central banks, buying by the very wealthy and buying by the average American, all of which will boost the price of gold considerably.
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Will such increased demand for gold, and price inflation of gold, come? The United States is already pumping money at very strong levels and the euro crisis may result in printing by the European Central Bank, which will magnify price inflation on a global scale. The printing in the United States will likely be enough to push gold much higher…and likely result in a lot of new buyers beyond just the current gold bugs – stepped up buying by central banks, buying by the very wealthy and buying by the average American. If global inflation occurs, $25,000 per troy ounce may be a conservative estimate as to where the price of gold eventually goes.
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Editor’s Note:
– The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
– Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above