Entering text into the input field will update the search result below

Will the Price of Gold Reach $5,000?

Aug. 20, 2010 7:31 AM ETGDX, IAU, GLD, SGOL, SIVR, PHYS, DGL, UGL, GLL, DZZ, DGZ, SLV37 Comments
Marvin Clark profile picture
Marvin Clark

All the current chatter these days on whether or not to reduce a portfolio’s exposure to gold is, to put it bluntly, a short term trader's conversation. A crowded trade, whales exiting a crowded trade, is it deflation or inflation? Gold is the inferior commodity to soft commodities such as wheat; gold’s current price elasticity, and more, all sound reasonable.

However, if you are a trend position builder and/or a long term investor of gold, we shall now review other important long term considerations that transactional traders omit from discussions.

If credit rating agencies have become less duplicitous, since the last decade, when they were arguably complicit in financial high crimes and misdemeanors, the US government’s credit rating must appear on someone’s credit watch list, inside of two years, if not, altogether downgraded to less than AAA. This is a plus for gold.

Between now and 2015, the global economy, measured in regional or national terms, will experience a protracted slowdown. In reality, a truer 21st century metric, for the production and consumption of goods and services, is seven billion individual, micro-economies. Nevertheless, the US will fair far worse than several developed nations and most emerging countries. The US 20th century debt structure is unsustainable with 21st century cash flows.

The US is also the largest component of the current global economy. Since the signing of NAFTA in 1994, US taxpayers has underwritten emerging markets’ growth through free-market supply-side economic policies. This change in industrial policy has stunted our internal ability to robustly expand our GDP. America’s only way out is discovering a transformative “next new thing”.

Realistically, in 2010, the Chinese economy simply isn’t large enough to save the world from economic contraction and, subsequent, global political instability. Only the American economy, if it were still functioning properly, could do the job. But it does not and

This article was written by

Marvin Clark profile picture
Marvin R. Clark is the Managing Principal of Monsoon Wealth Management (MWM). Monsoon offers affluent individuals and business owners’ wealth management, economic, and market advice throughout America. Based in Scottsdale, Arizona, Monsoon’s major task is employing a macroeconomic top-down research and analysis approach to formulate a relative value investment thesis across debt, equity, and commodity asset classes. We provide an actionable roadmap during this extraordinary period as geo-political and economic change accelerates. Prior to opening Monsoon Wealth Management in 2007, Marvin spent 10 years in the capital markets, fixed income division, of Charles Schwab & Co. Before Schwab, he spent 15 years on Wall Street with The Pilgrim Group, Bank of America, and Morgan Stanley. Marvin is the publisher/author of the Fixed Income Daily, a financial blog dedicated to providing essays and video clips from various analysts, money managers and officials, shedding light on the economy and markets. He is a contributing author with over 9,800 captive subscribers to the premier award-winning stock market opinion and analysis - Seeking Alpha and a contributing columnist for the Dubai-based, bi-lingual, Alorrya.com. Marvin is a popular featured and keynote speaker throughout the southwest and a recent guest faculty member for A.T. Kearney with Institute for Supply Management’s The Center for Strategic Supply Leadership CSSL forum. His unique interpretation of macroeconomic data and smooth writing style has been a reference source online for many financial newsletters including Yahoo Finance, Reuters, MarketWatch, Blogrunner, istockanalyst, The New York Times, Real Clear Markets, Kiplinger’s, and many, many others.

Recommended For You

Comments (37)

good thing all this information can be easily shared over the web, tv, radio, newspaper, etc. If you think you are the 1% who knows it and will prosper I wish you the best of luck. You are speculating and I would be too if I shorted gold right now. I do believe the demand for gold it at its peak right now and will collapse. We can agree to disagree. All the best.
indianamark profile picture
Nickel, oil, wheat, rough rice, gold, pork bellies, (have you seen the price of bacon lately?) virtually every commodity, except silver, have made new all time highs. Silver is 60% below its nominal high.

So when I take it out of the drawer, the same amount of metal will be there, but isn't it reasonable to expect it to be much higher in price?

The same goes for the producers. There will be the same number of shares, but at much higher prices. Some of my stocks are less than half their nominal high, yet they are much more profitable today.(Well, I will have more shares in my precious metals funds as the dividends and capital gains are reinvested.)

My expectation is at least a ten fold increase. Others are much more optimistic.

This is how Homestake Mining made millionaires in the '30s. 99% of the public didn't know about Homestake Mining. 99% of the public don't know about silver.
It is a form of currency, not a company. If you put a pile of gold in a box and lock it the next time you open the box you still have the same pile of gold. Comparing gold to a corporation that produces a product or service is not a relevant comparison.
indianamark profile picture
Gold is a precious metal. Silver is the magical metal.

You wouldn't have to squirrel away 70% of the available gold to get a real price spike. It would take even less silver taken out of circulation to send the price higher than you would believe.

Virtually all the gold mined is still around while 95% of all the silver mined is in toxic land dumps or exploded in missiles.

Here in Indiana the Eli Lilly drug company has made many millionaires, if you bought their stock years ago..In the years to come the people that bought silver will be the new millionaires.
You all need to get off the cool-aid. It is as if you need someone to support your fantasies of getting rich off the gold you own. It is a precious metal, not a magical metal. The only way gold will reach these unrealistic prices is if I steal 70% of the supply and hoard it in my basement like they do with diamonds. In the years to come people buying gold at its current price are going to kick themselves in the arse for being convinced by the 3AM infomercials. Lets get back to the basics here. Supply and demand will win out.
Marvin Clark profile picture
The main thrust of the article is wealth preservation. I'm asking readers to consider the loss of purchasing power of the dollar going forward and the cost of capital based on debt to the US.
Marvin Clark profile picture
This is technology at work. If this article were about the iPad you would see an add perhaps from AT&T. Manufactures have always a lined themselves and their product with potential buyers..

Companies like P&G and other manufacturers of household detergents and soaps found it easier to target housewives in the 1930's and 1940's by producing melodramatic programming, hence, the name "Soap Opera".

Banner ads attaching themselves to articles about gold is just the latest iteration of target marketing.
Definitely, i am not saying that you are writing articles in favor of SPDR. However, this (un)Trust is trying desperately to push this bubble by creating demand for gold, using advertising. This is not healthy and sooner or later Gold will collapse on its own weight.
When i see an SPDR advertising on both sides of this article, it pretty much tells me that this bubble GLD ETF has serious demand problems and it will collapse together with Gold very soon. Story repeats. When retailers comes in, institutions get out and then boom. Oil was going to 300 as well.
indianamark profile picture
I like the Aden sisters prediction. And they put a date on it: $3,000 to $5,000 by February, 2012.
Mr. Clark, thank you Sir for a very well written piece on the fire storm which this way comes. You are a bright light in a sea of darkness.
fivedayoil profile picture
Gold is a good investment during this period of dominant uncertainty, but I don't agree that $5000 is attainable in the foreseeable future as it would almost certainly deal a debilitating and lasting blow to the gold jewelry trade with the possibility of long term price conditioning effecting other precious metals jewels.
I am convinced that what Mr Clark writes is true. Back at the turn of the century (2000) just prior to the new century beginning I bought gold. I thought back then that the Y2K thing was going to break America and thought that the economic system was going to collapse. I believed that Americans were living beyond their means and that markets were very overvalued. I was glad I did this as the investment in Gold has given me a great rate of return. My wife back at the turn of the century thought I was nuts! Now she says that she is glad we diversified into Gold. With the debasement of our currency, I would not at all discount $5000 an ounce Gold.
fivedayoil profile picture
Will gold reach $5000, certainly not this year, it is also highly unlikely to reach these dizzying heights by 2015 unless unpredictable world shortages occur fuelled by global gold hording, competitive disenchantment and disagreement between world trading partners. Gold prices will undoubtedly reach new heights, slowly goaded ever upwards by each new month of financial uncertainty, swelled reluctantly by the lack of corporate investment and management enthusiasm laid low by poor future growth prospects. Of course better times await the moment when growth and wage rises slowly increase the beleaguered and battered consumer confidence. Gold's slow climb upwards is undeniable while the world markets scrutinize and stress test each nations banks, slowly endorsing each single bank which will eventually lead to the full endorsement and confidence certification for all participants. When this foolproof strategy has reached its limits, the investment lights will flash around the globe leading to a new national prosperity. The astute gold investor by this stage will have already sold at an excellent profit, while the more risk orientated will have held on a little longer, but not by much, whereby they will also sell, nerves worn down by the excruciating slow gold ascent. My own thoughts are a slow climb to $1500 with confidence, jobs and investment returning, reducing gold's climbing power, sending it sliding into a downward trickle rapidly followed by the inevitable waterfall until the next crisis.

Thanks Marvin for another good read, If I might briefly take up the case of the outlier you mentioned, at some point in the distant or not too distant future the oil reserves will also be named as a precious commodity, and all fuels will be rationed amongst those who need it the most. It is of course difficult to accurately predict the future, who knows another form of energy may be unveiled and available to all. In the event that no such discovery comes about maybe, just maybe gold holders will return to ride another day while others will walk.
Cuthbert profile picture
Marvin (or others in the know), do Marvin's comments only apply to gold or also to other precious metals. Is gold a term we use to apply to all precious metals, or is there something special about gold versus, say, silver?
Cuthbert profile picture
Marvin (or others)- do Marvin's comments on gold also apply to silver, platinum, etc. Is gold a term we use for precious metals as a class, or is gold a special case?
Marvin Clark profile picture
My general thesis applies to all precious metals. But if I had to limit my choices I would start with gold and silver.
Dollars are nothing more than DEBT. Debt that can never be repaid at anything near current valuations.

Will a dollar still buy a toothpick in ten years?
Eventually there wont be a dollar price for gold and silver , or a yen price or pound price etc. Gold and silver will BE the price for everything else . Simple honest solution to a world torn apart by fraud and criminality on a staggering scale.
Once again, Mr. Clark creates a serious and logical argument for holding gold and silver. Since it is very hard to hold grains, rice and other commodities in one's garage without rodents and insects invading the stash, gold and silver are logical choices.

The planned demolition of our economy by the corporate elite mobsters, supported by 30 years of bought and paid for politicians, who migrate like the wind and birds to wherever the cheapest exploitable labor force can be found in order to sell the junk stuff to Americans on the unemployment lines, have sold a very disastrous way of life for over 1/3 of the nation's people. And, it will creep upwards. See more foreclosures, and abandoned mortgages, along with ghost town exburbia in many cities.

I say cut back one's spending and buy stuff, if possible, that is not produced by the mobster elite; and, get out of stock and mutual funds to show your objection to the criminal elite's serfdom philosophy.

How low will the dollar go? Good question. More than likely, it will remain at a reasonable level, since many will still use it to make exchanges for goods and services, and invest in it.

As Mr. Clark so stated our government spending in the war, international policing, and spying/intelligence sectors/culture is wasteful and worth-less, since it adds little to nothing to the real economy.

I await Mr. Clarks excellent view of the economy and society.

Chancer profile picture
Financing the "next new thing" is a problem. The people with the money are not supporting innovation and creativity that grows the economy and provides jobs.

A positive example of this is the venture capital funding of Aptera (hybrid electric) by VC funding company of Bill Gross (Pimco).

We need thousands more start ups like this.
Marvin Clark profile picture
I agree 100%.
Submitter above, "USisCORRUPT, is correct. An economic adviser friend of mine comments that the boyz have been practicing the Ponzi moves on us for sometime with the "Bailout" undoubtedly the largest scam on the American public ever, ie "To achieve SO LITTLE with SO MUCH based on so LITTLE ANALYSES AND TRANSPARENCY".
GOLD is no exception to the manipulators.
Marvin - Always a pleasure to read your articles. I agree wholeheartedly with your premise of what is, has and will occur, with gold and to a lesser extent, silver being the beneficiaries of mankind's financial folly.
Do you have any indication as to time lines? And what would be your percentile recommendation of PMs in a portfolio? Once again, thank you for your well thought out and presented article.
Marvin Clark profile picture
Thanks. What is the old saying: you may predict the direction or you may predict the timing, but only a fool will attempt to predict both. I think we are on the final approach to our destiny.
The Recusant profile picture
One of the best articles written about how gold will eventually rise in a sinking fiat currency world. Good work! I'd love to hear your advice on what gold investments you'd prefer in the near, mid, and distant future.
Marvin Clark profile picture
Stay conservative. Buy bullion-backed ETFs,Vienna Philharmonics, Ultra High Relief Double Eagle, any 99.99% coins. I don't advocate collectables unless you are an experienced collector. Bags of silver, ingots. Go to my website and click on the Mints of the World drop down menu. All the major government mints are there.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

Related Stocks

SymbolLast Price% Chg
VanEck Gold Miners ETF
iShares Gold Trust ETF
SPDR® Gold Shares ETF
abrdn Physical Gold Shares ETF
abrdn Physical Silver Shares ETF

Related Analysis

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.