Good Chance Gold Could Drop To $250 By 2020! (+5K Views)

Gold is in a long-term downtrend and could drop as low as $250 by 2020. Here’s why that is likely the case.

The commentary above & below consists of edited excerpts from an article* by Anthony Lerner as posted on SeekingAlpha.com.

Gold In A 10-yr Bear Market

Gold just finished the fourth year of what I believe will be a ten year bear market. By the year 2020 or so gold has a very good chance of revisiting its 2001 low of $250 dollars. Over the next twelve months gold might go down to $850 or so, maybe lower. If you still hold physical gold outright, gold ETF’s or gold mining stocks take advantage of this rally and sell.

(click to enlarge)

(click to enlarge)

The two charts above tell the long term story of gold. In 50 years gold has had 3 major trends.

1. There was a massive uptrend in the 1970’s.
2. This was followed by 20 years of sideways to down between 1981 and 2002.
3. Gold rallied steadily and strongly from 2002 to 2011 as part of the great commodity supercycle.

I believe another great gold trend has already begun.

Fed Monetary Policy

…The long term macro economic trends in gold prices are determined by monetary policy at the U.S. central bank in much the same way as the U.S. dollar. (The history of gold over the last 50 years can be described in 3 great trends driven by 3 great changes in Fed policy). [See HERE for details from the original article.]…

The history of gold as shown in the two charts above shows that we are in an extended bear market for gold. There won’t be a Volcker like squeeze on monetary policy. Yellen and the other governors are being ultra cautious. Expect a long, slow careful tightening of monetary policy. Expect a long, slow painful grind lower in gold prices with plenty of counter-trend bear traps along the way. Like now for instance…

Gold is a currency. Like the U.S. Dollar, its long term price movements are directly correlated to U.S. Federal Reserve monetary policy…The depth of the Great Recession has made the Fed ultra careful but, nonetheless, a new era of tighter U.S. Fed monetary policy is upon us.

Conclusion

Gold at $1200 is well below its high from 4 years ago, but it is still closer to the top than its ultimate bottom. If you are long gold in any form, physical, ETF or equities you should sell them now.

*http://seekingalpha.com/article/3580526-gold-is-in-a-long-term-downtrend-driven-by-fed-monetary-policy?ifp=0

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