Two Views on Gold but Same Conclusions – Big Increases in Price Ahead
September 21, 2012 by Gold Editor
SOURCE [Mineweb] - Yesterday's Mining Journal Gold Day in London differed from the norm in that as well as seeing presentations for a few companies it started with two keynote presentation on gold and the gold price by Ross Norman of Sharps Pixley and Charles Gibson of Edison Research and while both approached the subject from slightly differing angles their ultimate conclusions on where the gold price is headed were remarkably similar. Ross Norman was the first to speak and looked at the long term pattern of gold price appreciation having been driven initially by fundamentals, but latterly by the global economy - but also concluded that on the patterns shown by other bull markets the current gold bull could have some way to run yet which would likely see the gold price rise to unprecedented levels, but at the moment very much driven by the huge increases in U.S. monetary supply to which the rising gold price bears a very strong relationship. With Europe and now Japan following a similar path this is not just a U.S. phenomenon.
On the bull cycle front Norman concluded that these bull cycles tend to last for around 17 years trough to peak and on this basis there would be around 7 years or more yet to run. He also commented on the gold bubble argument so popular with gold's detractors and came to the strong conclusion that this is not the case. Gold is not yet following a bubble pattern but he did concede that it does have the capability of meeting some bubble characteristics at some stage in its climb.
A week ago at the Denver Gold Forum, Pierre Lassonde looked at the Dow:Gold ratio as being an indicator of where gold is heading and pointing out that past history suggests that this might end at 1:1 (suggesting that at the current Dow level gold should rise to over $13,000), Norman also alluded to the relationship between the Dow and gold - but used a more conservative 2.5:1 ratio as where things might well end up suggesting that gold might rise to $4,000 with the Dow falling to 10,000.
Other points made were that gold accounts these days for less than 1% of global assets giving it room for advance here, that it is under-owned and that its average run rate over the past ten years or so has been around 17% a year - a level he feels could continue for the next few years at least. In a reasonably benign economic scenario he felt that gold would double in price in the next few years - but should the global economic situation continue to deteriorate it could easily go to double this number.