What’s next for gold? Seems like a fairly simple question. Unfortunately, it is nearly impossible today to get a simple answer. That’s the problem.
Why is that? And, if we can find a simple, straightforward answer, how do we know the answer is correct?
Perspective and intent are factors. But so are logic and accuracy.
It is likely, though, that most people who ask the question, “What’s next for gold?”, are generally inquiring about its price. In other words, what will the price of gold be next week? next month? next year? And – generally speaking – advisors, analysts, and others try to answer accordingly.
But logic and accuracy are extremely critical. And if one is a short-term trader, timing becomes just as important. A quick, upward or downward movement of fifty dollars per ounce, with proper timing, can be very profitable – or not – to a trader or speculator.
When one is focused on the price of gold, there is a tendency to overlook its true value. Discrepancies between prices and fundamental values occur often but are eventually resolved. In other words, prices and values seek and find equilibrium. Insofar as gold is concerned, the yellow metal was overpriced in August 2011 at $1900.00 per ounce. And it was underpriced in December 2015 at $1040.00 per ounce. Price and value for gold are currently at equilibrium.
That means that a gold price within its current range of $1200-1300.00 per ounce represents fair value. More specifically, $1250.00 per ounce is consistent with the decline of over ninety-eight percent (98.25%) in the dollar’s value since 1913.
So what’s next for gold?
We can answer the question very simply by changing one word. Ask instead “What’s next for the U.S. dollar?”
Answer that question and you will know what to expect regarding the price of gold.
The U.S dollar is a substitute for gold (i.e. real money). The price of gold is an inverse reflection of the changing value of the U.S. dollar. The ongoing, never-ending deterioration of the dollar’s value means ever rising gold prices over time.
