New credibility for
$900 gold in five years
by Jim Blanchard III
Gold Newsletter
"Many
of us who are bullish on gold and silver and the precious metals shares
are understandably reluctant to talk about super high gold prices such as
$750, $900 or $1,000 per ounce. In the first place, it hurts credibility,
and in the second place, there are so many different variables over the
long-term that talking about gold prices of higher than $500 now is of little
or no use to investors.The
economic environment of the 1970s, which eventually propelled gold to $850
per ounce by January 1980, is not the same economic environment that we
have today. But, on the other hand, the world has entered a new period of
global monetary reflation, although it will take several years before the
world sees and identifies this important trend.Even
though most of the talk will be about deflation for the short-term, the
next five years will become increasingly similar to the 1970s, at least
in the sense that the world economy will be more inflationary and there
will be more potential for monetary and economic crisis. In such an atmosphere,
extraordinary highs in gold prices such as in late 1979 and early 1980 would
not be out of the question. In fact, in inflation-adjusted terms, it would
take a gold price of about $1,600 per ounce to match the 1980 high of $850!Will the price of gold over the long-term (five years) reach such dizzying heights? This time around we have a much more powerful supply/demand argument than we had in the 1970s, and more and more we will have the "economic and monetary crisis" arguments for gold in our favor.
Some well-respected money managers and analysts are beginning to agree with us. For example, Martin Armstrong of Princeton Economics, who manages a large amount of money and has been a major bear on precious metals for several years, predicts a bottom in gold between March and July of 1998, and then a bull market with gold reaching $975 by 2003.
Our
business associate and friend, Frank Veneroso, in his incredibly well researched,
up-coming 1998 publication, "The Gold Book" argues persuasively
that even today the equilibrium price of gold is $600 an ounce, so that
when all the right things fall in place over the next several years, gold
can reach at least $900 an ounce.Do
I agree with these projections? Yes and no.Yes,
I think that gold can go to $900, $1,000, or even $1,200 an ounce, but not
until many things are in place that we don't have today, and it's simply
too early to say for sure when we'll have them. What I do feel comfortable
in saying is that, sometime in the next three years, we'll see $500 an ounce,
and that alone should be sufficient for some of our favorite investments,
such as Durban Deep, to give us 2,000% or more on our money. And
if Martin Armstrong and Frank Veneroso are correct and we get $900 gold...well,
I don't even want to think about it." 3/98Editor's
Note: Jim Blanchard III is editor
of the Gold Newsletter, 2400 Jefferson Hwy., Ste. 600, Jefferson, LA 70121.
Monthly, 1 year, $159.