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…[Y]ou may be curious why, despite continued money-printing and abysmal US
economic reports, gold hasn’t been able to hit new highs. The answer is that gold is currently priced for collapse. Many investors believe the yellow metal has topped out and are selling into every rally. Treasuries have temporarily overtaken gold as the primary safe-haven asset [but, as I see it,] once that dynamic is broken the counterflow into gold will be tremendous. [Let me explain further.] Words: 797
So says Peter Schiff (www.europacmetals.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Schiff goes on to say, in part:
Gold will continue testing the $1,600 barrier until it surprises to the upside spurred by the announcement of QE III, a calming of fears in Europe, or any shock to the Treasury market.
Remember, the key to this market is to understand that the market for US dollars and dollar-denominated debt is headed off a cliff, which will send the price of precious metals soaring. Now is a time for uncommon confidence. [Read: Martin Armstrong Clearly Explains Why the USD is Strong and Gold Weak in This Terrible Economic Environment]
Nerves of Tin
Being a gold investor is tough business. The last thing any government or corrupt big bank wants is to have a bunch of people putting their savings into hard assets – and gold is one of the hardest of all – so we’re constantly up against tides of propaganda saying that gold has no value or is the refuge of doomsayers.
The effect of this is that even heavy gold investors are always waiting for the other shoe to drop. When house prices were rising, no one was worried that the market had peaked or prices were unsustainable. No one was asking whether all the thin-walled McMansions going up would actually be worth anything in a generation, but for gold, Wall Street has been shorting it all the way up!
Nowhere is this pessimism more evident that in gold mining stocks. Rising inflation has driven production costs higher, but the mistaken belief that inflation is contained and Treasuries are a safer haven is keeping a lid on gold prices. As such, many of the major producers have missed their earnings projections, and their share prices have been punished. This has placed a cloud over the entire sector. In fact, the P/E ratios of major gold miners are near record lows. [Below are links to a number of articles suggesting that now is the time to buy gold mining stocks:
- Contrarian Investors Take Note: Extreme Low of Gold Miners Bullish Percent Index Screams BUY! Here’s Why
- Stephen Leeb: Junior Gold Miners Could Go Up 10-fold In Next Few Years! Here’s Why
- Jeff Clark: Are Gold Stocks Still Going to Bring the Anticipated Magic? Yes, Here’s Why
- Hathaway: A Gold Price of $2,000/ozt Could See Gold Mining Stocks Double! Here’s Why
- Now’s the Time to Take Advantage of Current Discount on Mining Shares – Here’s Why
- Gold/Silver & Mining Stocks Going From Their Cycle Bottoms to Parabolic Peaks by 2015]
Stock prices reflect future earning expectations, and judging by the low P/Es, Wall Street expects future earnings to plummet. This likely reflects their bearish outlook for gold, which is generally viewed as a bubble about to pop….
Chronic Memory Loss
Since most investors do not truly understand gold’s economic role, they assume the 10-year bull market must be a mania, but manias show parabolic growth detached from any fundamental driver. The definition of a mania is the bidding up of an asset quickly and beyond all long-term justification.
Gold, however, has grown steadily in inverse correlation with real interest rates,… [as per the Gibson’s paradox which is outlined in the following articles:
- The Future Price of Gold and the 2% Factor
- Short-term Interest Rates Are Behind the Price Of Gold – Here’s Proof!
- Low Real Interest Rates Say Gold Bull Still Has Legs! Here’s Why
- Low Real Interest Rates = Continued High Prices for Gold – but For How Long?
- What Do Rising Interest Rates Mean for the Price of Gold?]
As a reminder, here’s a chart detailing the correlation:
(Click to enlarge)
The Opportunity of the Decade
At the end of the day the gold price is not a mystery – it’s a proxy for dollar weakness. After spending the previous fall and winter testing new nominal highs above $1,800, future investors may come to view spring and summer 2012 as the opportunity of the decade. Gold has shown its strength and retreated. While most investors will take that as a signal that the market has topped, some will take advantage of the general trepidation to add to their positions at hundreds of dollars off the highs.
While I think gold is a bargain at $1,900 considering today’s circumstances, the market phobia of a price collapse is allowing us to buy at well under established highs. Now is a time for uncommon confidence.
[Indeed, Schiff is not alone in his prognostications as the following article shows:]HAVE YOU SIGNED UP YET?
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*http://www.resourceinvestor.com/2012/08/02/bullion-is-now-being-priced-for-collapse?ref=hp&page=2 (To access the above article please copy the URL and paste it into your browser.)
Editor’s Note: The above posts may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Related Articles:
1. Low Real Interest Rates = Continued High Prices for Gold – but For How Long?
Why is it that the demand for gold moves inversely to interest rates – that the higher the rate of interest the lower the demand for gold, the lower the rate of interest the higher the demand for gold? [Let me explain why and what the future seems to hold.] Words: 1053
2. The Future Price of Gold and the 2% Factor
It is my contention that the price of gold rallies whenever the U.S. dollar’s real short-term interest rate is below 2%, falls whenever the real short rate is above 2%, and holds steady at the equilibrium rate of 2%. Furthermore, for every one percentage point real rates differ from 2%, gold moves by eight times that amount per year. So if the real rates are at 1%, gold will move up at an 8% annualized rate. If real rates are at 0%, then gold will move up at a 16% rate (that’s been about the story for the past decade). Conversely, if the real rate jumps to 3%, then gold will drop at an 8% rate. [Let me explain.] Words: 982
3. Short-term Interest Rates Are Behind the Price Of Gold – Here’s Proof!
Some gold bugs say that this is only the beginning and gold will soon break $2,000, then $5,000 and then $10,000 per ounce but the question is, “How can anyone reasonably calculate what the price of gold is?” For stocks, we have all sorts of ratios. Sure, those ratios can be off . . . but at least they’re something. With gold, we have nothing…. [or more correctly, had nothing, until the development of my very own model for doing just that. Let me explain.] Words: 945
4. What Do Rising Interest Rates Mean for the Price of Gold?
The return of the Euro debt contagion and drop in the bond markets across the world is pushing interest rates higher and it has investors concerned and rightly so – and nowhere has the concern been more prominent than in gold. [Let me explain.] Words: 759
5. Low Real Interest Rates Say Gold Bull Still Has Legs! Here’s Why
Many agree that the United States’ massive budget deficits and global monetary inflation support the gold bull market. I don’t see this changing in the near future. Still, sentiment is not enough upon which to rely. I need a yardstick and, for me, that yardstick is U.S. real interest rates. [Let me explain why that is the case.] Words: 1600
6. Fitzpatrick: Charts Suggest $2,400 Gold & $50 Silver By Late 2012/Early 2013
“[The current]…base building process for gold…has been similar to the 2006/2007 base before it went higher (see chart)….If it breaks out through… $1,688, and in particular, eventually, through $1,791…the short-term target for gold would then be in the $2,050 to $2,060 range. After a short-term pause we would then expect a continuation up to the $2,400 area by the end of the year or beginning of next year.” (See long-term Gold chart)
7. John Embry: Gold to Surpass All-time High by Year End & Then Unleash MAJOR Upswing in PM Stocks
I think the big issue going forward is the growing shortage of available physical gold. I strongly believe one of the reasons for the shortage is a lot of it is headed East. The last four or five months of the year gold should challenge, and easily take out, its all-time high.
8. Leeb: Gold Going to $3,000 Before the End of 2012!
The Fed is [going to] keep interest rates at zero until the end of 2014 [and that] is as aggressive as it gets and as bullish as it gets for gold. Inflation will be let out of the bag, maybe for the next three to four years. In this environment gold and silver are the best investments around…We are really talking about the next leg higher in this bull market…This is the leg I expect to take gold to $3,000 before the end of 2012.
9. Stephen Leeb: Silver’s Going to $60, $70, by the End of 2012 – Easy!
I think scarcity in oil is a dramatic tailwind for gold. Politicians will inflate. They don’t want oil to bring down the economy like it did in 2008. Remember, this inflation will take place with commodity prices already high. So this will create significant inflation. This means higher gold and silver. Gold at $3,000 by the end of the year, easy. Silver $60, $70, easy.
10. Goldrunner: Fractal Gold Analysis Says Gold On Way to $3,500 Mid-year!
Our Fractal Model suggests the wave for Gold in US Dollars will sweep up into the $3500 to $3600 area into the mid-year time-frame. The leading edge of that time-frame begins in May and extends out for a few months. A potential for Gold to spike to a $3900 extended fib level exists. Like all parabolic moves in Gold, the late stages create the biggest price movements. Personally, I would be happy with a huge Gold run up to the $3200 level. Words: 1400
11. The “80-20 Rule” Suggests Gold Will Reach $8,300/ozt in Spring of 2015!
The “Pareto principle” – it’s often referred to as the “80-20 rule” – states that 80% of the effects of something come from just 20% of the causes (that is that 80% of people control 20% of the wealth, that 80% of sales come from 20% of your customers, etc.) and a new report by Erste Group, the Austrian investment bank, says this principle can be applied to bull markets as well, including the current bull market in gold, and following this line of thinking, you get an $8,300 price target for gold by the spring of 2015. Words: 285
12. Update: 51 Analysts Now Maintain that Gold is Going to $5,500 – $6,500/ozt. in 2015!
Lately analyst after analyst (161 at last count) has been climbing on board the golden wagon with prognostications as to what the parabolic peak price for gold will eventually be. That being said, however, only 51 have been bold enough to include the year in which they think their peak price estimate will occur and they are listed below. Take a look at who is projecting what, by when and why. Words: 644
According to a recent Elliott Wave theory analysis gold is about to go parabolic reaching $3,495 in June 2013, $6,233 in April 2014, $10,899 in Sept. 2014, $18,712 in December 2014 and culminating in a parabolic peak price of $31,672 on January 16th, 2015! See the chart below. Words: 600
14. New Analysis Suggests a Parabolic Rise in Price of Gold to $4,380/ozt.
According to my 2000 calculations, if interest rates and inflation stay constant over the next 2 years, we could expect to see (with 95.2% certainty) a parabolic peak price for gold of $4,380 per troy ounce by then! Let me explain what assumptions I made and the methods I undertook to arrive at that number and you can decide just how realistic it is. Words: 740
15. David Nichols: Expect to See $2,750 – $3,000 Gold By June 2013 – Here’s Why
The interim peaks in gold have been spaced 21 months apart over the past 6 years and have seen gains from 80.2% to 97.3%. As such, given the fact that the low of this last correction came in at $1,524 four months ago, we can expect gold to reach a new peak price of $2,750 to $3,000 in 17 months time (i.e. June/July 2013). [Let me explain in more detail.] Words: 976
16. Will Gold Peak at $2,500, $8,890 or $15,000?
When considering that the conditions which propelled gold and silver to their 1980 highs are much worse today, I predict both metals will easily eclipse those previous highs. That means $2,500 gold and $150 silver at the very minimum, but more likely a parabolic ascent to $8,890 gold and $517 silver before all is said and done. Words: 1063
17. von Greyetz: Gold Going to $3,500-$5,000 in 12-18 Months – and $10,000 Within 3 Years!
There will be a catalyst coming soon, probably some concerted action of money printing between the Fed, IMF and the ECB. That will happen as a result of the economies, worldwide, collapsing….The catalyst could come from anywhere but the money printing will be part of the next move in gold, that’s for certain….[and it] will lead to collapsing currencies, and investors buying gold at any price…I see gold reaching $3,500 to $5,000 in the next 12 to 18 months. Within 3 years, I see the gold price reaching at least $10,000.
18. Aden Forecast: Bubble Phase in Gold to Begin in 2013 and Possibly Reach…
Gold has been moving within a mega upchannel since 1970 and still has a ways to go before reaching the top side of this mega uptrend. How high is anyone’s guess but were gold’s price rise to match the 2300% rise realized in the 1970s (and our research suggests we could see the start of the bubble phase by next year) we’d see a $6000 gold price, which would blow the gold price well above the mega upchannel. [Let us explain our conclusions with the use of 2 charts.] Words: 495
19. Rebound Ratio Suggests New High for Gold By Mid-year
Some of the most rewarding set ups in investing come when extremes have been reached. Currently the Gold Miners Bullish Percent Index has dropped to 7.14% – an extreme reading, one rarely ever seen, and not since the panic drop in March of 2009. Following that signal, GDX rallied for the next 2½ years increasing over 4 times in value. As such, a move up in the Gold Miners Bullish Percent Index from these historically low levels could signal another major move in gold mining stocks….[Let me explain further.] Words: 1078
21. Stephen Leeb: Junior Gold Miners Could Go Up 10-fold In Next Few Years! Here’s Why
I think the junior gold miners sector could up ten fold over the next few years based on gold just going to $3,000 or $3,500 [let alone to] $5,000 or $10,000 which I think is possible. Here’s why.
22. Jeff Clark: Are Gold Stocks Still Going to Bring the Anticipated Magic? Yes, Here’s Why
We’re invested in gold stocks not just to make money, but for the chance to change our lifestyles and with their lackadaisical [dare I say dismal] year-to-date performance, one may begin to wonder if they’re still going to bring the magic. [Here are my views on the subject.] Words: 740
23. Hathaway: A Gold Price of $2,000/ozt Could See Gold Mining Stocks Double! Here’s Why
We will not be surprised if gold revisits the high of last year ($1,900) or pushes through to new all- time highs by year end….and gold stocks should respond very favorably to the perception of a directional change in bullion. We believe that the ten month decline in the gold price has been the major headwind for gold mining stocks….but if gold were to trade at $2000/oz. later this year, and should the ratio of gold mining shares (XAU basis) return to the mid -point of its range since the launch of GLD in 2004, or roughly 15% versus the current level roughly 10%, mining stocks could double on a 25% increase in the gold price.
24. Stephen Leeb: Precious Metals Investors Need to Hang in There!!
If investors step back and look at this from a longer-term perspective, they will realize that politicians feel the only way out of this mess is to print more money. After the money printing will come the inflation. It will be higher inflation than anything we’ve seen in the post-World War II period and it will send gold, silver and all commodities skyrocketing.
25. Gold/Silver & Mining Stocks Going From Their Cycle Bottoms to Parabolic Peaks by 2015
Once every year gold and stocks form a major yearly cycle low while other commodities form a major cycle bottom every 2 1/2 to 3 years. Occasionally all three of these major cycles hit at the same time….That’s what’s happening right now and it should lead to a powerful rally over the next 2 years, culminating in 2014 when the dollar forms its next 3 year cycle low. Words: 622
26. Now’s the Time to Take Advantage of Current Discount on Mining Shares – Here’s Why
Gold stocks are now trading as though peace, prosperity, balanced budgets, and the repudiation of fiat currencies were about to break out across the globe, sending the metal back to $1,000 per ounce in the very near future. Given the stagflation conditions in the developed world, however, and governments’ proclivity to use money printing in order to jump-start an economy, it may be wise to take advantage of the current discount being offered on mining shares.
27. Precious Metals: Don’t Want To Play Anymore?
We suspect that many precious metals investors are saying, “We don’t want to play anymore!” and our reply is, “You mean you want to quit right now? Right at the bottom of this cycle? You must be crazy – and that is crazy with a capital C!” True, this is a very challenging market environment for resource shares, but we know what the ultimate outcome will be: higher share prices. The only question is “when” and our opinion is that we are very close in time of being able to say that the lows are behind us. Let me explain. Words: 785
28. Sprott: Current HUI Level Spells O-P-P-O-R-T-U-N-I-T-Y
Before we end the year we will hit new highs in both [gold and silver]. Then the mining stocks [will] react. The big problem has been [to date has been that] there is not this momentum in the prices of bullion, which is keeping people away from the gold stocks. If we can get the price of gold and silver going back up, I’m sure people will come back into the mining stocks.
29. John Embry: PM Stocks One of the Greatest Buying Opportunities of ALL Time!
If we’re not at a bottom [in gold and silver and precious metals stocks], we’re very close to it. The sentiment is dismal and you can see that particularly in the stocks which are almost tragic. I’m shocked quite frankly at the valuations and how low they are. In the fullness of time, this will be seen as one of the great buying opportunities of all-time.
30. Get Positioned: “Gold Rush” Will Cause Gold Stocks to SOAR – Here’s Why
Whatever their reasons, the number of investors wanting exposure to gold is increasing. Many who ignored it a decade ago are now buying. Those who started buying, say, five years ago, continue purchasing it today in spite of paying twice what they paid then. Slowly but surely, it’s becoming more important to more people…but what happens when it becomes a must-own asset to a substantial majority instead of a small minority? Sure, the price will rise, probably parabolically, but putting aside speculation on the price of gold for now, have you thought about what happens if you have trouble finding any actual, physical gold to buy? [Let’s explore that possibility and what that would mean for gold stocks in such an eventuality.] Words: 870
31. James Turk: Gold Stocks Are Making History – Here’s Why
We’re making history here. Gold stocks have never been this undervalued before. We’ve had a 12 year bull market in gold, but we’ve also had a 15 year bear market in the mining shares…It’s very rare in market history to see an outlier like this. This is an extraordinary event. Years from now we are going to look back and shake our heads in disbelief at how undervalued gold stocks were in 2012.
32. Is it Time to Load Up on Gold Stocks?
By almost any measure, gold stocks are undervalued but should we load up? Gold mining companies are earning record margins. Stock prices, however, have not responded in similar fashion but when the broader investing community begins to take notice, investors will snap up these highly profitable stocks and push prices higher. The “catch up” in gold stocks could be tremendous but the question, of course, is timing. We don’t know when gold stocks will begin to catch up and the data don’t suggest they must rise right now or that they’ve hit bottom so should we load up just now? Words: 590
Understanding what we are facing right now is critical to our survival…. [and to do so] we must embrace a global correlation approach to comprehend the true global implication of how capital moves. [Martin Armstrong provides a remarkable explanation of what is going on right now with the U.S. dollar, bond yields and the current price of gold. It would be well worth your time to read and reflect on what he has to say.] Words: 822
34. Currency Collapse Coming: Go Get Gold NOW!
Nobody knows when the final crisis will occur, but like so many times throughout human history we are marching down a narrow path to the final catastrophe of our fiat currency system. [Let me explain why.] Words: 1336