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[Given that] gold prices are likely to rally, that the DJIA is due for a
correction, and given the 50 year exponential trends for each, gold will likely be selling for over $4,000 per troy ounce by 2020 – 2022. In fact, depending on the unfolding “insanity” in our political and financial world…[gold could conceivably reach $8,000/ozt. by then].
By Gary Christenson (DeviantInvestor.com)
…How do we make sense out of the last fifty years? Over [the past] 50 years the DJIA has been priced approximately 12 times larger than gold on average. [Below is a] graph [of] the sum of the DJIA and 12 times the price of gold in “funny money” i.e. U.S. dollars, on a log scale.
- As expected, the sum has increased exponentially.
- A spike occurred in 1979-1980 when gold zoomed higher in a bubble. All bubbles (such as bonds in 2016) collapse and the sum dropped back on trend.
- Commentators often claim that gold prices were in a bubble in 2011, but prices were NOT in a bubble like they were in 1980. Another bubble in gold and silver prices will come.
- The sum is currently at the lower end of the 50 year log scale trend line, even with the DJIA near all-time highs. Gold has considerable room to run higher even without a 1980 style blow-off in price.
- The exponential trend channel rises about 2.6% per year less rapidly than national debt over 50 years.
Gold, the DJIA, their sum, and national debt increase exponentially…[with] debt increasing [the most]… rapidly. [Below is a] graph [of] the 50 year sum of gold and the DJIA, boosted by 2.6% each year, and divided by the official U.S. national debt.
- The ratio has been essentially constant for 50 years.
- The 1980 bubble in gold prices is clearly visible.
- The 2011 non-bubble in gold prices is clearly visible.
Conclusions
We live in an exponential world.
- Gold, the DJIA, their sum, and debt have increased exponentially for 50 (and more) years. Expect the trends to continue.
- Official national debt has increased, on average, 2.6% per year more rapidly than the sum of gold + the DJIA for 50 years.
- A 50 year trend of increasing debt and prices is not likely to materially change, short of nuclear war, a global economic collapse, or the arrival of honest and responsible politicians.
- Expect much more debt – it has successfully created wealth for the financial and political elite since 1913.
- Along with exponentially more debt, expect exponentially higher gold prices and higher DJIA. Expect volatility and corrections.
What About Gold In The Future?
We should expect the exponential trends to continue.
- Debt creation will probably accelerate.
- The DJIA is due for a swan dive to another seven or eight year low. The high – so it looks now – occurred in mid-2015.
The high trend line for the sum of the DJIA and 12 times gold reaches approximately 90,000 in 2020 – 2022. Assume the DJIA corrects lower and climbs again to 20,000 in the next few years, thanks to central bank emergency levitation procedures. Gold prices could be approximately $6,000 per ounce in 2021. Is this a prediction? Of course not!…
Regarding higher gold prices: …Higher gold prices look both reasonable and inevitable. Fifty years ago gold sold for under $40. Gold selling for over $4,000 does not seem unlikely. Depending on the unfolding “insanity” in our political and financial world, $4,000 might be considered quite low in 5 – 10 years.
Take it easy. Look at the 50 year big picture. Don’t get lost in the daily and weekly political and financial distractions. Gold and silver were valuable long before central banks were created and will remain valuable long after the world has returned to financial sanity. Take it easy while gold soars like an eagle.
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