How High Will Gold Go?

Gold has gone down in Swiss Francs because the Swiss Franc has appreciated about 15% against the dollar in the last couple of months.

It has still gone up in Swiss Francs over the last 6 months.

I bought in April at 1160 SFR an ounce. in July at 1220 SFR an ounce and it is now 1270 SFR an ounce although it was over 1300.


Just like any other commodity there are ups and downs due to a number of factors including the weakness if the dollar

I'll take the contrarian view here. Gold is up by roughly 300% in the last 5 years (and over 400% over the last 10). Since then, we've seen darn close to zero real inflation, so one can't explain that rise on the basis of actual currency debasement; we've also seen approximately zero net change in the dollar over that same period (roughly a 10% drop vs the euro, I'll consider 2%/year as approximately zero, similar to the inflation rate).

So, in effect, those who've been buying gold have been doing it on the basis of anticipated, not actual, inflation. And while I can't fault someone for betting on inflation with the Fed as permissive as they are, it should be noted that the net money supply growth has been constrained due to banks tightening their lending standards - and in a fractional reserve system like ours, it's really the banks that control the money supply. We'll see what Basel III does, but any increase in reserve requirements should have some degree of constraining effect on money supply growth.

The point is that it's hard for me to envision a situation where our currency falls by a factor of 3 to justify the run-up that's already in the gold price. What I suspect is happening is a massive me-too trade. People see prices have increased, and they expect they'll keep increasing. We saw that with the NASDAQ around 2000, and more recently with housing prices. While it's impossible to predict when it will happen, ultimately prices must reflect reality.

Of course, all that's my opinion only, and I'm not an investment advisor, nor making any manner of suggestion as to trade recommendation.

As we all know, gold is quoted in U.S. Dollars. One of the main reasons for this is that international contracts are negotiated in U.S. Dollars. Gold in terms of other major currencies is not increasing in price as quickly.

The U.S. Government I think is deliberately, and in a controlled manner, depreciating the relative value if It's currency, and for very good reason. It the U.S. Dollar falls a bit, America's exports become more competitive, and the country is able to employ more people. To most Americans, I would say the unemployment problem is more pressing than a depreciating dollar and therefore, the rise in the value of gold.

That way, America can pay its debts with the same number but smaller sized Dollars. The Country's debts are far larger than the value of the gold reserves.

From a numisfanatic point of view, buy gold coins if that is your thing, but just buying gold for speculation is risky, because the stuff has a notorious record for price volatility. Better to be a gold miner and sell it on forward contract, that is, at an agreed price at a fixed date in the future.

Those are two separate questions, with quite different answers.

The first is asking for a short-term prediction on human behaviour. I can't predict what the guy in front of me on the freeway is going to do in a few minutes time. There's no way I'm going to be able to reliably predict what a whole planet full of humans is going to do over the next few years. I'd just be guessing, and frankly, so is everybody else. There's a word for deciding where to put your money based on guesswork: "gambling".

The second question is asking about the theoretical maximum price of gold, and here we can be on firmer ground. As the price of gold rises, known sources of gold currently written off as economically unviable become viable, and as those sources come online the gold they produce increases the supply, which in turn helps prevent the price from rising further. But as all the sources of "easy" gold dry up, the price of gold will become more and more connected with the price of energy, since it's the energy required to run the extractors that would be the most expensive component.

At the current price of energy, gold would have to hit somewhere around the $10,000 to $20,000 mark to make extraction from seawater economically viable. Supply from that source would be unlimited for many generations - there are hundreds of thousands of tons of gold in the world's oceans, just waiting to be extracted - so the price would stabilize there. If they find cheaper energy (like the much-prophesied nuclear fusion) then this price threshold could come down.

If we somehow exhaust that source, the next cheapest source is space. Unfortunately, there doesn't seem to be much gold on the Moon, otherwise we'd probably already be mining it. You'd need a price of over $50,000 in today's money to make mining on Mercury and the asteroids viable, with current technology.

Finally, gold can be transmuted from other elements using a nuclear reactor. It currently costs millions of dollars an ounce to synthesise gold this way, but this is purely the cost in energy needed to run the reactor and sift the gold out from the other elements that would be made. If the price of energy comes down, or they need gold badly enough, our descendants will be able to make as much gold as they please.

$1439
:-)

To be honest not sure? I see these two numbers and wonder why not the same? j

Gold is the 19th most abundant element in the Earth's crust. Some of it is relatively easy to get at, some of it ain't.