In 1999, I wrote some articles where I predicted gold would rise to $2000/ounce within the 2015-2020 time frame, which generated comments about my body parts and where they were located with respect to other components on my body. Gold was trading in the $260-$280 per ounce range at that time, and I was projecting that it had around 700% upside within the next two decades. Sticking with that projection, with gold approaching $1400/ounce, gold would have about 50% or so upside over the next five to ten years, which I still think is a fairly reasonable projection.
What drove the price of gold and it's ilk higher for several years was it's undervaluation relative to it's inherent value as a precious commodity. But that was then and this is now. The price of gold and other precious metals are being driven higher by fear, greed, momentum, and speculation, things that tend to be shorter term in nature. The chart of gold prices over the past dozen years looks like it has recently entered projectile motion. A dozen or so years from now, will it look like it was giving us the middle finger during it's present explosive run?
I do much of my anecdotal research concerning market sentiment in the gym. So many have bought gold, gold miners, metals, etc in recent months. Some of the people are the same ones who bought Internet stocks and high beta tech stocks in 1999/2000. People are bragging about their massive gains in gold/mining/commodities stocks. What does this imply about where we are within the great commodities rally?
In early 2000, one steroid injected dude told me he had been to a presentation where the audience was advised to buy shares of Vitesse Semiconductor. I expressed to him why I felt that was a very bad idea, he eventually retorted to my unpopular view, "I'm buying 'em tomorrow morning"." Since he looked like he bench pressed trucks in his spare time, I didn't argue the opposing side too aggressively.
I am NOT calling this a top in the precious metals sector. The sheople (sheep/people) have to drive the price insanely high before the inglorious top, and that hasn't happened yet. I feel a lot less bullish about shares in this sector now, where I perceive the easy money has already been made. When the dust settles from this enormous move many years from now, I anticipate the price of gold will be lower than it is today, possibly significantly lower.
On a more global level, the markets overall have enjoyed a generous seven week rally. The NASDAQ Daily Sentiment Index stands at a record 259.82, and is still rising. The market has been overbought for a couple of weeks, but keeps getting more overbought. Experiencing a little fear of heights doesn't seem so unreasonable at this juncture.