Wednesday, 30 October 2013

Why Gold might surge to the $5000 Mark by 2016 - Part 1

Talk to a thorough contrarian for five minutes and you will instantly notice the difference in you two’s opinions about the current market scene. Why would that be so? Not because a contrarian likes to contradict popular beliefs and opinions, out of habit or something like that, but because a true investment contrarian always steps back from the circle of influence to actually overview the entire scene, weigh both the sides, establish the probable pros and cons of the current market trends, and then reach to an opinion about the same. They aren’t the ones to follow the bandwagons.

The current lot of financial analysts and investment contrarians has firm beliefs of gold prices soaring up to $5000 mark by 2016. The CEO of McAlvany Fianncial Group, Mr. David McAlvany had muttered the same, back in May this year, about why one shouldn’t take the dip in gold prices (then) lightly and overlook the precious metal. He opines that, looking past the current downsize in inflation, he feels that we are closer to a major inflation scenario than anyone can really appreciate.

He also pointed out that no matter gold might be trading low at the moment (and for the past several months) investors are lacking a hindsight into the future. He means that the fundamentals of the market still remain relevant and binding on the market. When the dreaded time comes, top level segment of populous will have a situation equal to the phrase: A bird in hand is better than two in bush while for the commoners like us, those on the streets would surely get squashed like a bug!
Taking a look back at 2001, gold prices had been as low as $225 an ounce. Within a timeframe of minuscule eight years, they soared to a staggering multiple of four from that in 2001. Gold then traded at $1,100 an ounce. Bet not many contemplated the same back then in 2001. But prices soared, slowly but steadily showing a positive peak every successive year. And this pace is only expected to continue from here on. Taking cues from the 1970’s gold only seems to go much, much soaring from here.

Those who invested in gold, around 1971, did so in $42 an ounce and by the end of the decade, the same gold was traded for an $850 per ounce. Meaning, those who had an early investment in gold were benefitted by almost 2400%! Back then, too, on one probably had conceived this would happen and so are a very few now.

In the next coming part, we shall see why this forecast holds valid to an extent, when we preview and review the factors determining the hike of gold to $5000 by 2016.