E $10,000 Gold May Be Reasonable; Or Wishful Thinking; Or Meaningless

Is $10,000 gold reasonable?

Right now, from gold's current price point of $1225.00 per ounce, we are speaking of an eight fold increase to get to that gloriously celebrated (at least by some) number. Even if the specific price target is more modest - say $7000.00 per ounce - it is still a huge jump from where we are today.

It is, however, a reasonable possibility. Between August 1976 and January 1980, gold rose from $100.00 per ounce to over $800.00 per ounce.

More recently, an increase in gold from $275.00 per ounce in 2000 to its eventual all-time high of $1900.00 per ounce in 2011 translates to a seven fold increase.

There are some key things which differentiate the two examples. But the simple absolutes indicate that a $10,000 price objective for gold is not unreasonable, at least on a percentage-increase basis.

However, some of the differentiating specifics from the two examples are also applicable to scenarios which might lead to $10,000 gold.

One is timing. In the first example gold had already risen from $40.00 per ounce in 1971 to close to $200.00 per ounce in February 1974. After hitting a retracement low of $100.00 per ounce in August 1976, gold rose to $850.00 per ounce in January 1980. That's less than three and one-half years.

In the second example the seven fold increase took place over an eleven year period. The low point of $275.00 per ounce was twenty years past its previous all-time high of $850.00 per ounce and was its ultimate low point before it began its decade-long run to $1900.00 per ounce.

Both periods were similar in total length (about ten years). In the second example, if the $650.00 per ounce retracement low in 2008 is used, then the timing becomes more comparatively similar to the first example of the 1970s decade. What changes is the magnitude of the move cited.

The timing of both examples would run similarly in length - approximately three years (August 1976 to January 1980; August 2008 to August 2011. But now the percentage increase for the second example becomes three fold ($1900.00 divided by $650.00) rather than seven fold.

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