goldBack in 2002, I was talking about $1,000 gold. When we hit that mark in ’05 and ’06 I began predicting that gold would rise to $2,000.
Now, I’m saying gold will probably go to $5,000 in the next move up.
Looking at the performance of gold from 1976 to 1980, the metal went up eight times.   If we repeated that performance, gold would be at over $8,000 from today by the end of the decade.   I don’t know if the same thing will happen this time, but it tells you that $5,000 per ounce is not unthinkable.


 

 

 

Submitted by Henry Bonner, Sprott’s Thoughts

Charles Oliver manages the Sprott Gold & Precious Minerals Fund, which invests principally in gold and silver mining and exploration companies.

The last time I spoke with Mr. Oliver, he said the fundamentals for gold still looked attractive, based on gold’s historical performance relative to the Dow Jones. I spoke with him recently in Toronto.

What catalysts could take gold higher in the near term?

“Well, despite huge inflows of cash from the Fed onto banks’ balance sheets, the velocity of money, which strongly affects inflation, has not changed much. This explains why money printing has not translated into inflation.

“Governments have been lending at zero interest rates, and banks can make a small margin by lending that money back to the government. As a result, cash stays on bank balance sheets.   But this could change soon.

“The Fed’s reduction of QE, which they have reduced from 85 billion to $35 billion per monthwould intuitively be negative for gold. But this also indicates that banks are becoming healthier, which could mean they will begin to push money out into the broad economy. The velocity of money could pick up as a result.

“The 70s were a classic example where banks – and companies – felt shaky about the economy overall, so they held onto cash at first. But when they got a whiff of inflation, they quickly looked for ways to spend that cash. Rising nominal prices made it a good idea to buy things right away – you would be paid to hold onto those things, such as real estate or oil, because their price was rising. This caused a vicious cycle with the U.S. dollar losing value.”

Where is gold going from here?

“I’d say $5,000 – by the end of the decade. Of course people look at you like you’re crazy when you come out with a big prediction. Really it is not that big, going off of the historic relationship between the price of gold and the level of the Dow Jones. Back in 2002, I was talking about $1,000 gold. When we hit that mark in ’05 and ’06 I began predicting that gold would rise to $2,000. Now, I’m saying gold will probably go to $5,000 in the next move up.

“Looking at the performance of gold from 1976 to 1980, the metal went up eight times. If we repeated that performance, gold would be at over $8,000 from today by the end of the decade. I don’t know if the same thing will happen this time, but it tells you that $5,000 per ounce is not unthinkable.

“The market is irrational. In 2013, the price fell by a lot, but looking at the fundamentals it’s hard to find what caused it to fall apart. Quantitative Easing was still going strong then. China was importing a lot of gold – around 40 percent of the worldwide gold production that year. And going forward, I see China continuing to be a major player, buying a lot of gold. This power shift will eventually result in the demise of the U.S. dollar too.”

Will gold begin to head higher in 2014?

“By year-end, I’d say gold could reach $1,600 to $2,000 per ounce. But of course, I’ve been surprised by how long this market is taking to recover. I’m not sure when this market will wake up and come back to life.

“I see a brief window within the next few months where the gold price could recover, because the gold price tends to perform poorly from March through June. It tends to perform better in July and August, so I’d expect something to happen then if the gold price is going to take off this year.”

P.S.: Join us in person at the upcoming Sprott Vancouver Natural Resource Investment Symposium, from July 22-25. You will hear about the opportunity that investors have in natural resources today from some of the best in the business, including Robert Friedland and Doug Casey. The whole show is hosted by Rick Rule, Chairman of Sprott US Holdings. You can find out more about the event here and click here to register now.

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  1. Eric Sprott has stuck to his 2000 dollar gold call for as long as he could.  The passage of time has forced him to change his tune.  Now he finally admits that he has no idea when the gold market will turn around. I think he should tell the entire truth.  He never had a clue, from the beginning of the year when he made this gold price prediction, when the market would turn around.  He was just selling his book from the beginning.  Now, this is someone who should have access to the best information that money can buy.  If Eric Sprott has no idea what is going on in the markets then that pretty much tells me that Bo Polny sure as hell has no idea either!!!!!!!!!!!!!!!!!!!!!!  Bo is a scammer.

    • I would lump Eric into that class as well!  Has he ever seen anything that he didn’t pump as “good for gold and/or silver” while selling his as fast as he can????  I will never get over that! Selling out of his own EFT b4 the crash while pumping the shit out of it….if I had been invested in it, I would be suing his ass off for that bs.

      That is why I only invest in PM miners and/or 2x leveraged ETF’s stocks and real phyzz bullion in my hand ;) The miners/etf’s for leverage and the bullion for sanity. Never invest in a paper product expecting to get real phyzz back, no matter who is supposedly running it…that includes goldmoney and all of those types of deals, too.

    • And Sprott was using those funds (profits on physical) to buy hammered down silver stocks. Why cant you guys tell the truth and quit spinning your own misleading story? Sprott has almost all of his money in gold, silver and the miners. Yes, his funds have been crushed. You think he’s happy about that? If he wanted out of this sector he would have bailed years ago. He didnt, and wont. So maybe ask yourself why he is still fully invested in PM’s? 

  2. “Well, despite huge inflows of cash from the Fed onto banks’ balance sheets, the velocity of money, which strongly affects inflation, has not changed much. This explains why money printing has not translated into inflation.
     
    Shall I wait for the choir to say that bank note generation is inflation in itself and everything else is just disguised as corruption as spot snoozes on this economic ethic? If gold supplies are falsified, large banks manipulate daily action and inflation is uncontrollable then how could Eric come to such a drastic conclusion? Hmm…
     
     
    Or we can say that some inflation theories have been terribly misguided and even have a major pied piper finally acknowledging it. But wait, toliet paper, groceries and higher education are through the roof so big money should start protecting their wealth! As if they see the world in same way as a peon…
     
    I have to agree with his terms in a decade or two. PMs will have its day eventually
     

  3. “Looking at the performance of gold from 1976 to 1980, the metal went up eight times. If we repeated that performance, gold would be at over $8,000 from today by the end of the decade.”
     
    I assume that he means “8 fold” and not “8 times”.  If gold goes up 8 times in 8 days, $1 a day, then it is $8 higher at the end of those 8 days.  If it goes up 8 fold, however, that is an entirely different matter.  If gold were to go up 8 fold from today to the end of this decade, it would be over $10,000 an oz.
     

  4. According to my way of thinking, based on my perspective of the banknote scheme, it’s ‘funny’ that folks can still speak of constantly depreciating debt-units as ‘money’.

    So, are such fellows saying that ounces of gold should equate to 5000 units of debt? HAAAAAhahahahahaha.

    Money Is Weighed, Fictions Are Counted.

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