Jeff Clark of CaseyResearch.com offers his take on where gold might be headed this year by looking at the precious metal’s performance over the past nine years. His findings? Since 2002, gold’s returns have averaged 20.4 percent.
If we take that average gold return and apply it to the Dec. 31, 2010 London PM Fix closing price of $1,421.60, we’d be looking at a gold price of $1,711.60 by the end of 2011. Last year, gold outperformed the average return over the past nine years by more than 10 percent as gold returned 30.7 percent in 2010. If gold matched that return in 2011, we’d be looking at a gold price of $1,858.03.
“It thus seems reasonable to expect gold to surpass $1,800 this year,” Clark writes, “as well as reach a potentially higher level since the factors pushing on the price could become more pronounced.”
Still, what if gold mania really takes off this year?
“What if global economic circumstances continue to deteriorate?” Clark asks. “What if worldwide price inflation kicks in? And what if government efforts at currency debasement get more abusive?”
Would it be possible to match gold’s meteoric 125.7 percent that occurred in 1979? If it were, we’d be seeing gold prices over $3,000 per ounce. To be accurate, we’d hit $3,208.55.
Gold at $3,200 an ounce sounds like a tantalizing possibly (and I wouldn’t rule it out), but the thought should scare most investors – not get them salivating. If gold rises more than 100 percent in 2011, rest assured it’s because the world’s biggest investors, governments and financial institutions will have lost faith in paper currencies. And that’s a scary thought.