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« The USD: Can it continue to rally? | Main | Important Lessons From Todays Market Action »
Tuesday
Sep302008

Its 2012 and Gold rockets past $5000!

Now that we have your complete attention we thought that this article would be of interest to you. It arrived in this morning’s mailbag from Jeff Clark who is one of the editors of Casey Research. This is an interesting read although we should point out that it is not the opinion of the team here and it belongs to Casey Research. Enjoy!


Back from the Future: Gold in January 2012
By Jeff Clark, Editor
Casey Research – BIG GOLD

What’s more valuable than one ounce of gold? How about the news release I brought back with me from the future that reveals the price of gold then? It’s with nothing but unabashed excitement that I republish an article that I saw cross the AP wires on January 21, 2012...

Gold Rockets Past $5,000 in Heavy Trading

Jan. 21, 2012 (AP) For the fifteenth straight day, the price of gold rose on record-setting volume, reaching a milestone few believed possible just a few short years ago. Roaring inflation and a fading U.S. dollar, combined with the continuing stress and uncertainty of World War III, pushed gold past the psychological barrier of $5,000 (to gold bugs, the “Big Nickel”), to close at $5,108 per ounce. Gold is now up an astonishing 66% since December 31, matching its percentage ascent of January 1980.

“It was another peak day,” proclaimed an exhausted trader on the floor of the NYSE, whose daily order flow, he said, included hardly any gold stocks as recently as a year ago. “The orders for mining stocks and the bullion ETFs are pouring in so fast and in such large volume that the computers needed help from us humans on the trading floor.” Floor traders had been widely considered obsolete in 2008.

The excitement is thick and palpable in this bastion of capitalism, as each trader tries to scream louder than the next. Goaded by the fear of being left behind, gold buyers keep pouring in, and the price continues rocketing upward. “This is a once in a lifetime opportunity,” shouted an ecstatic floor broker, who admitted he had been slipping in orders for his own account.

Meanwhile, outside the exchange, worried-looking buyers formed long lines at coin shops around the city. Already swamped with orders, the shops became financial refugee centers when a rumor ignited that Congress was considering confiscating gold, something that hasn’t happened since 1933 under President Roosevelt. The rumor gained strength from last year’s imposition of exchange controls. Supposedly needed for national security reasons, they gave rise to the “northern gaucho,” a term used to describe Americans who risk jail time to slip dollars across the border into Canada.

More violence was reported in the coin shop lines again today. In Manhattan, one incident was so serious that a life-flight helicopter had to be called in when a women stabbed a man who reportedly had cut into the line and then tried to enter the shop without a ticket. E-tickets for coin shop entry are now required by a city ordinance, something many consider very Orwellian. Some bullion shops have gone a step further and placed armed guards at entrances, who are reportedly none too polite when frisking customers for weapons.

While most are stunned by the yellow metal’s price trajectory, the rise in gold stocks has been even more dizzying. In spite of the tremendous gains they have had in the past year, the influx of new, first-time buyers has not slowed. Given the small number of real gold and silver companies, the buying pressure is, as one gold bug noted, “equivalent to pushing the flow of Niagara Falls through a garden hose.”

As seemingly every investor has learned by now, gold stocks are leveraged to the price of gold. While the metal is up five-fold in the last three and a half years, many stocks are up ten- and even twenty-fold. But it is the Canadian juniors that have shown the greatest leverage; a few of the better-managed companies have given shareholders returns of 50-to-1 or better.

“Our recommended Canadian stocks are up an average of 1,000% over the past three years,” said well-known speculator Doug Casey, speaking to a reporter with the good luck to find him in a hotel elevator. “However, our better performers have returned 5,000% to date. Our biggest winner closed today at $101 per share; we first recommended it at 87 cents.

“Adjusted for inflation, gold is just now reaching its 1980 top,” explained Casey. “This is something we’ve been expecting for years.”

But joy for some is regret for others – especially those who sold in 2008, when the metal lost 23%. “I panicked during the sell-off that summer,” lamented an investor. “I went another direction with my money, and I can’t tell you how many times I’ve regretted it. I sold most of my gold stocks for a big loss that year. But what I really lost was all the future profits I threw away.”

Scares from a fleeting rise in the dollar and a whiff of deflation convinced much of the public to dump gold and gold shares back then. And yet, as Doug Casey commented, “That was the buying opportunity of a lifetime and the last time the train stopped at a station with a 3-digit gold number.”

The buying is not expected to stop anytime soon. Time magazine just announced that its lead story in its upcoming issue will be a chronicle of the gold bull market that started in 2001, with a front-cover picture of a gold bull stampeding outside a derelict NYSE building.

With the widespread bullish sentiment for gold, it came as a surprise when someone in the elevator jokingly asked Doug Casey if he was considering selling. Mr. Casey gave no answer but got out at the next floor and explained that he needed to put something together for his subscribers.


Jeff Clark is the editor of BIG GOLD, a newsletter that focuses on the most prudent ways to profit from the gold bull market. Try BIG GOLD risk-free, with our 3-month, 100% money-back guarantee. With your subscription, you can access Jeff’s August interview with Doug Casey, where Doug gives specific numbers on the returns he experienced in the 1970s, and why he thinks the profit potential is even greater now.

Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.


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Reader Comments (17)

Dear Editors of Goldprices.biz,

I mostly admire your essays and forecasts for gold in the future. But the thing I do not understand, and you may enlighten me in this one, is why every topic of goldprices.biz nowadays is based on enormous gains during inflationary times like we have today. How can it be that there has not been an influx of money in the gold mining stocks, that were raiding in recent march 2008.

Please give a more shorter term vision to your readers about the recent outflux of credit from mining stocks.
Its not all about long term, you also should be discussing the the credit crisis turmoil with regards to the gold rush thats coming.

October 1, 2008 | Unregistered Commenterde Graaf

The headline may be metal and stock, but the big money was in the Jan 2012 options that had just expired. Some people who had purchased them with gold around $1000 saw what had been a $2000 option purchase go for $40,000 in a matter of a couple of years.

October 1, 2008 | Unregistered CommenterBC

THanks for the article. Sounds good for gold, but Yamana could still be having eternal issues that are dropping their stock daily regardless of gold.. and I own a load of it. Has anyone here spoken to anyone with Yamana. I have tried and have yet to get anything but a machine. Gold up -Gold down. Yamana drifts lower everyday. Has anyone on the site spoken with anyone at Yamana. Thanks

October 1, 2008 | Unregistered CommenterGAry

You got a point there Gary,

I'm in for the same information like you need.
Some more information about the Yamana downfall please !
Not just imaginary gains for 2012. Were talking today with crisis turmoil on our path...

Anything to declare...Anyone?

:)))

October 1, 2008 | Unregistered Commenterde Graaf

Inflation in 2012 is a joke! joke! joke!

October 1, 2008 | Unregistered CommenterRG

Gary,
I don't do much with AUY. Try Tom at www.tfnn.com, he has a call in show from 4 to 6 PM CST (New York time). You can listen over the web.

Of the Gold stocks they list, some have more or less risk than others. For example I place more funds in AEM than KGC because of political risk of KGC in Russia. While I do at times put $ in KGC, I realize that there is greater risk and expect greater reward and I invest less in KGC than AEM.

There are other risks in addition to political risk.

Where do AUY and GOLD sit on the risk scale? I know where I put them, but your call may differ. The KGC vs. AEM example of political risk is not too difficult because of Putin, but total risk is more subjective.

Total risk is one factor I use to select what of their recommendation to go after and how much. Sometimes I match them 100%, often not exactly and I will at times apply their logic to other similar companies.

This newsletter is a great tool, I like that they explain the how and way of their views.

October 1, 2008 | Unregistered CommenterBC

It doesn't answer my questions.
Contracted to one single then; Who is selling all of his gold nowadays??

The most liquid stock and cheapest producer of Gold in the world (Yamana) is lagging behind terribly. Some big hedgefund stockholder must be having margin calls.

Can't think of anything else except for deflationary times ahead. The 'real' M3 money supply is contracting though. Commodities are 20 to 30 procent down. Economy contracting also...my god...Did I just answer my own question?

Hang on people. Gold rush will come soon

October 1, 2008 | Unregistered Commenterde Graaf

Team; please keep the language clean, thank you.

October 1, 2008 | Unregistered CommenterGold Prices

De Graaf,

Shorter term we expect gold and our gold mining stocks to consolidate, with gold consolidating around $850.
Gold stocks are getting sold off with the broader market as investor credit lines are squeezed, but when the significant rises in gold prices come, their stock prices will get dragged up too. Patience is the key word here.
However we do acknowledge that even in the recent larger rally to $1000 in gold, gold stocks under performed. We are currently developing a strategy that will ensure that in the next large rally, our investments do not under perform in relation to gold. This may require a combination of stock, ETF and option positions, details of which we are still working on, but will be published when they are finalized.

BC,
We fully agree with you and intend to incorporate more option positions into our portfolio. Thank you for your continued high quality comments, they are much appreciated.

Gary & de Graaf,
Re: AUY
Yamana has underperformed gold in the recent correction, but its worth noting that AUY did bounce significantly from $7.26 to $10.94 as gold prices jumped. True, the stock has fallen back since, but we are still confident that this is one of the best gold mining companies in the world and will do well when gold prices begin to really head north.
However in the short term these stocks are vulnerable to hedge fund selling and margin calls etc, and as the economy goes into recession this creates less demand for mainstream commodities such as industrial metals. However one must remember that gold is a currency and not like the other commodities, therefore we believe it will rise significantly as investors come to realize that gold is in fact the best currency to have their wealth in given the current market conditions.

Thanks to all for their comments, please keep up the great debates!

October 1, 2008 | Unregistered CommenterGold Prices

No one can look in the at the situation and argure inflation. When lending dries and leverage has! to deleverage you get deflation. When jobs decrease you get deflation. To argue diffrent is not sane.

October 2, 2008 | Unregistered CommenterRG

Yep RG,
Thats what I said. We have a deflationary problem, the kind of 'things' Bernanke has been raised to deal with. His solution is inflation. Throw more money at it. Normally it should work, but not when the economic wheels a grinding to a blocking halt. Oil is good...but this system is running on dry lubrication...is called (Wallstreet)Greed.

Let the Obama/Biden ticket solve this problem. They truly got the arguments and the minerals for the health of America.

October 2, 2008 | Unregistered Commenterde Graaf

You need to carefully read and study the work of Ludwig von Mises. It will explain why Bernake or anyone else cannot print their way out of this mess try as they might. Fiat and Keynesian theory on works for so long.

Reas Ludwig Von Mises.....then get back to me.

October 2, 2008 | Unregistered CommenterRG

I'm familiar with the writing of Von Mises. Have to say I didn't finish it yet.
Momentarily reading work from Alexander Green and also a work from Peter Schiff - Crash Proof.

I'll talk on my own RG. I have a broad knowledge in life, so I am open to others individual opinions. Always.

October 3, 2008 | Unregistered Commenterde Graaf

The shortest commodity bull market lasted 13 years while the longest one lasted 17 years. We are approximately 8 years into this cycle as i speak leaving me to believe that at the least there is still approximately 4 / 5 years left which would bring us very close to the next Presidential Election. $5,000 an ounce for gold, possibly but i myself am looking for one ounce of gold to equal the Dow Jones Industrial Average and it will be at that point, buyer be ware.

December 14, 2008 | Unregistered CommenterWilliam Fleck

What is the use of gold going to 5000$ if we have a world war issue on hand!!! Somewhat absurd. Also i am not too pessimistic to see gold at 5000$ an ounce.

November 15, 2009 | Unregistered CommenterSavio

Jeff Clark, since its been close to several years now with this articleIm wondeing if you would be willing to do an update on this ? Has anything changd in your opinion or what new fundamentals have come up to the table ?

I dont see 5,000 Gold or 100 silver for another 10 years .Eventually when you speak in terme of prices ones predictions can come to pass because its a matter of how much time to get here .

July 5, 2010 | Unregistered CommenterRick

Hi,
What is your estimate of the price of gold in the future?
What do you expect the ratio between 1 oz gold and 1 silver in the future?

Thanks for the advice on the price of gold and silver.
Rob

May 26, 2011 | Unregistered CommenterPrice of gold MAN

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