Have Gold Prices Peaked?

[shinnosuke]

OK, are we just kidding ourselves? Will gold/silver prices really go parabolic?

Cut and paste:

How Much Upside Is Really Left in Gold and Silver?

By Jeff Clark

With gold a stone’s throw away from $2,000 and already up 30% on the year, the objective investor might begin wondering how much higher both it and silver can climb. After all, gold is nearing its inflation-adjusted 1980 high – and that peak was a spike that lasted only one day.

So, how much return can we realistically expect in each metal at this point? And is one a better buy than the other? There are dozens of ways to calculate price projections, but I’m going to use data based strictly on past price behavior from the 1970s bull market.

First, let’s measure what today’s inflation-adjusted price would be if each metal matched their respective 1980 highs, along with the return needed to reach those levels:

Returns Needed to Match Inflation-Adjusted Price
Metal Inflation-Adjusted Price Percent Climb to Match 1980 High
Gold $2,330 28%
Silver $136 227%
(As of 8-31-11)

Based on the CPI-U (the government’s broadest measure of inflation), gold is a couple of jumps away from matching its 1980 high of $850. Silver, meanwhile, has much further to climb and would return over three times our money if it reached its former peak.

But the CPI is a poor measure of real inflation. Let’s use John Williams’ Shadow Government Statistics calculations. His data are much closer to the real world, and the statistics are calculated the way they were during the Carter administration, stripped of later manipulations.

Check out how high gold and silver would soar if they adjust to this level of inflation:

Returns Needed to Match ShadowStats Alternate CPI
Metal Price to Match ShadowStats CPI Percent Climb to Match ShadowStats
Gold $15,234 735%
Silver $348 738%
(As of 8-31-11)

Clearly, both metals would hand us an extraordinary return from current prices. Those are some admittedly high numbers, but keep in mind that’s what the CPI figures above would register if government officials had never changed the formulas. What’s tantalizing about these levels is that we’re not even halfway to reaching them.

Let’s look at one more measure. I think another valid gauge would be to apply the same percentage gain that occurred in the 1970s. From their 1971 lows to January 1980 highs, gold rose 2,333%, while silver advanced an incredible 3,646%. The following table applies those gains to our 2001 lows and shows the prospective returns from current prices:

Returns Needed to Match 1970s Total Percent Gain
Metal Price to Match 1970s Total % Return Percent Climb to Match '70s Return
Gold $6,227 241%
Silver $160 285%
(As of 8-31-11)

Gold would fetch us two-and-a-half times our money, while silver would give an almost quadruple return.

Regardless of which measure is used, it’s clear that if gold and silver come anywhere close to mimicking the performance of the last great bull market, tremendous upside remains.

One might be skeptical because these projections are based on past performance, and nothing says they must hit these levels. That’s a valid point. But I would argue that we’re in uncharted territory with our debt load and money creation – and neither shows any sign of ending. We had a lot of problems in the 1970s, but our current fiscal and monetary abuse dwarfs what was taking place then. The need to protect one’s assets gets more pressing each day, not less so. That to me is the key signaling this bull market is far from over.

One may also be skeptical because the media continue to claim gold is in a bubble. To date their proclamations have been nothing but a great fake-out, every time. Want to know when we’ll really be a bubble? When they stop saying it’s one and actually start buying and recommending gold. When they begin running 15-minute updates on the latest gold stock. When you are sought out relentlessly by your friends and relatives because they know you know something about all this “gold and silver stuff.”

All told, I think the baked-in-the-cake inflation – rooted in insane debt levels and deficit spending – will be one of the primary drivers for rising precious metals this decade. This means the masses will look for a store of value against a plunging loss of purchasing power. Enter gold and silver.

The current correction may not be over, and we can count on further pullbacks along the way. But the data here suggest the upside in gold and silver is much bigger than any short-term gyration – or any worry that may accompany it. (emphasis mine)

[How exactly does an investor protect against the ramifications of massive debt levels in this country? Check out the free online video event, The American Debt Crisis, being held on September 14 at 2 p.m. EDT. This premier Casey event will review the current economic crisis and offer actionable advice for protecting yourself and your money. Join Doug Casey, David Galland, Olivier Garret, Bud Conrad, and Terry Coxon, as well as guests Michael Maloney, John Mauldin, and Lew Rockwell for this highly informative and practical event. Don’t miss it!]

The link (scroll down a bit):
http://www.caseyresearch.com/cdd/does-upside-remain-gold-and-silver

[balz]

The official inflation is BS... Look at shadow stats... Inflation right now is over 10%...

[Sheikh_yer_Bu'Tay]

Where gold, silver, copper, and other important metals act as the best reservoir for wealth is when a fiat monetary unit has finally exhausted itself. The day fiat paper reaches it's true intrinsic value (0), PM's and base metals will reach their zenith. What I am saying is they will become priceless in terms of FRN's, as FRN's will be worthless. You could get paid a million dollars per ozt. for gold , but would be a fool to take it. Gold and silver will not be available in FRN's for any price.

On that day there will be a bubble pop alright, but it will be the FRN bubble bursting against gold and silver true money.