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Forecast for the gold price

Fundamental assessments of the gold price

Only a few foresaw the upswing in precious metal prices after the turn of the millennium (such as Markus Mezger[1]). Comparatively many then dared to look into the future. The next table gives an overview of the assessments of gold market experts on the development of the gold price up to the presumed peak of the current commodity and precious metal cycle, which is expected to be reached in the course of the second half of the current decade.

Gold price forecasts by gold market analysts


US$ per troy ounce

Uwe Bergold (GR Asset Management)1


Yan Chen (Standard Chartered)2


Folker Hellmeyer (Bremer Landesbank)3


Harald Weygand (GodmodeTrader)4


75 further analysts with forecasts of...5

... at least 5,000 to 20,000

Source: 1 (2009), The Gold Will Go to $5,000/ozt. - or More! (Internet: 2011/06/update-these-90-analysts-believe-gold-will-go-to-5000ozt-or-more, accessed 01.10.2012).

Reaching a gold price of at least US$5,000 per troy ounce really only requires that the following trends continue roughly as expected:

  • Continuation of the current commodity and precious metals cycle,
  • increased awareness of the finite nature of resources,
  • further loss of confidence in the paper money system,
  • further increase in investment demand.

Below are ratios between the gold price and some financial market variables in numerical terms that suggest the upside still has a lot of room to run:[2]

  • Gold and gold mining stocks accounted for 28% of world financial assets in 1921, 20% in 1932, 30% in 1948, and 26% in 1981. At the end of 2009, the share (including ETFs) was just 2.6% with world financial assets of nearly US$200 trillion. To reach the same share as in 1981, the price of gold would have to rise to US$12,000.
  • In order to be able to cover the money supply MZM[3] of the world's 37 most important industrialized countries in the amount of US$ 53 trillion (2009) with their central bank gold, a gold price of US$ 58,000 would be required; if the entire gold available worldwide could be used, it would have to rise to US$ 13,000 thousand.
  • in 1980, 45% of the U.S. money supply M1 was covered by central bank gold, in 2009 it was still 5%. The gold price would have to rise to over US$10,000 to reach the 1980 coverage level.
  • Government, bank and corporate bonds amounted to US$ 92 trillion worldwide at the end of 2009. The gold price would have to rise to just under US$60,000 to fully cover the bond market with central bank gold available worldwide.
  • in 1938, 55% of U.S. debt was covered by the Federal Reserve's gold holdings, in the early 1980s it was 17%, and in 2009 - despite a fivefold increase in the price of gold since 2001 - it was only 0.6%. The price of gold would have to rise to $200,000 in order to cover the $52 trillion (3.7 times the 2009 U.S. gross domestic product) of U.S. household, government, corporate and bank debt with Federal Reserve holdings.
  • The global derivatives volume at the end of 2009 was US$690 trillion (US$260 trillion in mid-2006), 10 times the world's real estate assets at the time, more than 10 times the world's gross domestic product, 14 times the world's equity assets, 125 times the value of total physical gold holdings, and 1,750 times the value of the world's physical silver holdings.

The chart shows the gold price trend since 1900 and the possible trend in the coming years. A logarithmic functional form was chosen because it clearly shows the relative change. We are already well beyond the US$ 1,000 mark. Until the US$ 5,000 mark is reached, it is therefore only a question of the remaining increase at the right edge of the graph.

Gold price development

Performance of gold in the past with forecast for the future

Source: Own calculations and presentation based on data from (internet retrieval, dated 01.06.2012).

In the 1970s, the gold price increased 24-fold (from US$35 to US$850). In relation to the lowest price of US$ 250 in 2001, it would therefore only have to increase by a factor of 20 to reach US$ 5,000 per troy ounce of gold. The intermediate high of the gold price in 1980 (nominally US$ 850) corresponds, deflated by the official inflation rate, to a present-day real value of US$ 2,300. If, on the other hand, one deflates using the calculation method applicable in 1980, the result is a real value of US$7,500. The average of these gold prices adjusted for inflation using different methods results in US$5,000. According to calculations, a gold price of US$ 5,000 would also be necessary to cause a significant expansion of the range of underground resources.[4] Gold prices of US$ 5,000 can also be derived with the help of the Eeden-Müller gold price theory as well as on the basis of the Dow gold ratio and the gold-oil ratio.



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This article was written by Dr. Jochen Dehio - author of the book"Gold oder Silber - wem gehört die Zukunft?

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