Gold Prices – The Next Five Years

Breaking News: COMEX paper gold contracts closed on Wednesday, August 7, at $1,513, up from $1,274 on May 22. Gold bottomed at $1,045 in December 2015. The S&P 500 Index closed at a new all-time high on July 26.

Gold closed at its highest price since 2013.

What Happens Next?

  • We don’t know. Gold has disappointed for years, but central banks must “inflate or die.” Expect more QE, lower interest rates and excessive political and central bank manipulations.
  • But the more important question is: Are the COMEX prices for paper gold a fair value for the metal, or are they misrepresentative of what prices should be in this debt-based QE manipulated economy?
  • Should gold prices be higher or lower?
  • Consider the following graph of actual gold prices (each annual data point is the average of about 250 daily prices) and calculated gold prices based on an updated empirical model.

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WHAT THIS GRAPH DOES NOT DO:

  • It is an empirical model, NOT a mathematical proof. It guarantees nothing. While the model has worked for five decades, it could become less effective tomorrow, next year, or never.
  • The model does NOT use gold or silver prices to produce calculated gold prices.
  • It is NOT a price prediction for paper gold contracts on the COMEX.
  • It is NOT a timing model. You shouldn’t TRADE based on this model.

WHAT THIS GRAPH DOES:

  • The model shows an estimated value for (annual average) gold prices based on macroeconomic variables. It is a valuation model.
  • The calculated gold model uses official national debt, crude oil, and the S&P 500 Index as input variables.

Test the Assumptions:

  • Gold prices rise, along with most other prices, as the banking cartel devalues the dollar and pushes currency units into circulation. A proxy for inflationary price increases is the official U.S. National Debt adjusted for population growth.

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  • Official National Debt in 1971 was $400 billion. Today it exceeds $22,000 billion – over $22 trillion. Debt and prices will increase until the financial system breaks or resets.
  • Gold prices rise along with crude oil, the most important global commodity.
  • Crude oil sold for $2.00 in 1971. Today it sells for $51.00. It peaked at $147 in 2008. Crude oil prices rise because the banking cartel devalues the dollar, changing supply and demand and because commodities are sometimes more desired than paper assets.
  • Over the long-term, commodity prices, including oil and gold, rise and fall opposite to the S&P 500 Index. When investors favor stocks (and paper investments) commodity prices are often weak. When commodity prices are strong, stocks are often weak. The model assumes that gold prices are mildly, but inversely, affected by the S&P 500 Index.
  • Gold is real money, unlike the digital and paper debts (“fake-money”) issued by central banks. Gold will rise in “fake-money” units as the banking cartel devalues currency units by issuing ever-increasing quantities of “fake-money.” In many currencies, gold has already reached new all-time highs.
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