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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.
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Gold prices rise along with crude oil, the most important global commodity.
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Crude oil sold for $2.00 in 1971. Today it sells for $55.00. 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.
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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.
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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.
Assumptions Summary:
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Gold prices move higher as population adjusted national debt increases. (Dollar devaluation drives all prices higher.)
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Gold prices move higher and lower with crude oil, another commodity.
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Gold prices move opposite to the S&P 500 Index. (Investor preference for commodities versus paper assets.)
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The model weighs and combines these macroeconomic variables to produce a “calculated gold price.” Call it a “fair value” price.
Examine the graph of gold prices and calculated gold prices for nearly five decades. Note that:
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Calculated prices approximately match the annual average of daily gold prices.
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Calculated prices may bottom and rally several years before the paper gold price bottoms and moves upward.
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Calculated annual prices don’t reach gold’s high and low daily prices because daily prices spike too high and crash lower.
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Buying for the long term makes sense when daily gold prices are low compared to the “calculated” price. (Think early 2019.)
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Selling a portion of core positions is sensible when daily prices are well above “calculated” prices, such as in 2011.
Gold Prices in Five Years?
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I don’t know, but almost certainly much higher.
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The model depends upon national debt (will be much higher), crude oil prices (higher in five years—probably) and the S&P 500 Index (flat to higher—maybe).
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National debt will rise rapidly. A 100-year average increase is almost 9% per year, every year. Current economic conditions, no credible spending restraints, “QE to Infinity,” and the coming recession will boost deficits and debt into the stratosphere, even without more wars.
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Crude oil prices rise and fall. They traded below $11 in 1998, reached $147 in 2008, but moved below $30 in 2016. Mid-East tensions and inflationary expectations are rising. It’s reasonable to expect crude oil prices will not fall much from current levels and might rise considerably.
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The S&P 500 has risen from 100 in the 1960s. It is overvalued today and likely to fall, but in the long-term it will rise as dollars are devalued. Assume it corrects and then rises slowly. Remember, the S&P 500 collapsed over 50% after its 2007 high.
THE RESULTS:
