Gold Price $250 Forecast - Dear Harry Dent: Wanna Bet?

TMO ^ | 2-19-2015 | Jeff Clark

[blam]

February 18, 2015
Jeff_Clark

Some of you may be aware that investment guru Harry Dent has publicly stated that gold will fall to $250-$400. He specifically predicted:

Around $700/ounce is a certainty in gold by 2015 to 2016, and $250 is a possibility well down the line by 2020–2023.

His forecast is largely based on his belief that deflation will prevail.

Governments are fighting deflation. If government stimulus fails, we will have deflation, not inflation.

(snip)

As a gold analyst who’s spent every day of the last seven-plus years watching this market, I can’t let this pass. I’m sure gold will not fall to $700, much less $250-$400—not in real terms (who knows if the US dollar will even exist in 2020?… Or maybe there will be new dollars with several zeros cut off).

Is this just because I’m a stubborn gold bug? No, because I agree that we’re seeing some deflation, too. But I definitely think some type of crisis is headed our way, and gold does well in crises—even deflationary ones.

Is it perhaps because I don’t like Mr. Dent? Not at all—at my suggestion, he was a speaker at one of our Summits.

Quite simply, I think Harry Dent is resoundingly wrong. And I’m so sure he’s wrong that this is a public invitation to him to enter a wager with me and put his money where his mouth is, which I’ll detail momentarily.

Why Harry Dent Is Wrong

There are a number of reasons why I think Mr. Dent will be wrong about the future gold price…

(snip)

[StoneWall Brigade]

Very Interesting

[blam]

(ahem) Never mind.

Hyperinflation To Start in 2015: Economist Says Get Supplies : “Gold, Silver, Canned Goods...

[PA Engineer]

Thanks for the ping.

[old curmudgeon]

If you need to change location, you can carry gold in y our coat lining.

Many who fled Germany fled with diamonds and gold hidden on their person.

You would have a hard time fleeing with two or three hundred pounds of ammo.

The right tatctic is to have some of everything. Some gold, some cash, some ammo, some food, etc.

[pgyanke]

Guess not. Peace.

[Osage Orange]

It happens.................

[pgyanke]

If crude reaches a long-term equilibrium below $40 a barrel, there's hardly any way to avoid the cratering of the gold price bubble.

Ah, I see we have someone with a sense of history. Generally (until recent wild price swings) 1 oz of gold would buy 10 barrels of oil. That equation has held true for a very long time (before the irrationality of the commodity markets in 2007, at least). Given that understanding, oil at $40/barrel should give us a value for gold at $400/oz.

Some things have changed, though... for example, gold has more industrial, high-tech uses these days and oil has become more plentiful with modern extraction technics. Back in the old days, gold was mainly used as a storehouse of value. The increased industrial demand will likely give gold a premium over its historical valuation relative to oil so I maintain my price target around $700/oz.

[VerySadAmerican]

I haven’t personally experienced any DEflation.

[VerySadAmerican]

The problem is living in a location where you can protect all those supplies you suggest buying. I live on the outskirts of a huge city. I don’t have the money to buy rural land so I’m stuck here. I’ve got about a month’s food supplies and some water filters and a bunch of ammo. Nothing else I can do.

I’m also beginning to think about the boy crying “Wolf!” I’ve been listening to “It’s gonna’ hit the fan any minute” for about 4 years and nothing has happened.

[wita]

Don’t get me started on the Progressive Amendments, I’m not in favor of that sort of taxation... the Feds should tax the States and the States should tax their citizens. All politics should be local where the locals have greatest control.

We are in complete agreement that no citizen of a state should be sending money directly to Washington DC. State needs come first other than perhaps national security, but not at the expense of state sovereignty.

[trebb]

What about Silver?

If gas gets too expensive, you can ride him to work.

On the more serious side, i see a lot of ads touting silver now - similar to what was going on with gold before it hit its current wall. Since silver is so low now, it probably isn't a bad hedge if purchased before it does its uptick. I'm not buying anything right now.

[JimRed]

Isn’t gold a supply-demand type commodity? I would think that the only things that could drive it down that far would be (A) if nobody wanted it any more(ain’t gonna happen)or (B) if it became common as, say, tin. Maybe a cheap way of refining it from seawater, for instance, or huge previously unfound deposits easily mined.

Where am I going wrong?

[SunkenCiv]

Thanks pgyanke. Like oil, gold is a commodity. The gold supply has more than doubled (that is, all the gold ever mined, not that is currently traded per se) since 1960 or so. Even apart from unknown extraterrestrial sources, it’s not farfetched to speculate that the gold figure will double again during the next 50 years, but the production increases will be streaky, and made feasible by the occasional price bubble. Like gold, oil is in finite supply, but unlike gold, oil’s commercial uses mostly consist of some sort of combustion, or use in chemistry to make other products with finite lifespans. Substitutes for gold in industrial and commercial uses come about thanks to price spikes. Oil use drops when the oil price spikes, but (like gold) the price spikes also lead to more production, often from previously unprofitable sources.

[pgyanke]

Well said.

[SunkenCiv]

Thanks pgyanke!

[cornfedcowboy]

If our economy experiences moderate to heavy deflation, the price of gold will be the one of the smaller problems in life. Seriously, if gold were to fall to $300-400 per ounce due to deflation, all bets are off when it comes to your job, your ability to pay your mortgage, and the health of the the financial system world wide.

[pgyanke]

Seriously, if gold were to fall to $300-400 per ounce due to deflation, all bets are off when it comes to your job, your ability to pay your mortgage, and the health of the the financial system world wide.

You're assuming the direct connection between the price of gold and inflation. The only reason there is a noticeable correlation is because of the late '70s. Inflation shot up for a host of reasons but gold shot up for a very specific reason... Nixon closed the gold window ending the Bretton Woods system in 1971. It was the beginning of fully, global fiat currencies but also the beginning of American demand for gold on the world markets. For 40 years ending in 1974, Americans and been unable to trade gold. From 1974 to its peak in 1981, the greatest consumers in the world got to work driving up the demand for gold.

Take out that specific period of time and there is very little correlation to assume that a low price of gold must mean economic calamity. Frankly, if you followed the trendline for inflation, you would have conclude that gold is way overvalued--even by an inflationary standard.