Clearly, we can see that the gold price escalation is still inversely tied to the US dollar.
This is a 79-month plot chart (2/28/01-9/30/07) showing the bottom of gold @$256.75 & a US$ peak of 121 on month-end Feb. 2001. On 9/30/07 gold was $733.65 and the US$ had dropped to 78.63. You can dice up and work these numbers any way you wish. I've given you the data plots to do so. The leverage I see here is that for every one dollar drop in the US$ Index there is a corresponding rise of $11.25 in the gold price. If this ratio holds and the US$ should achieve 45, then we'd achieve a gold price of $1,112. Personally, I feel this gold price is on the low side for several reasons.
gold and the dollar do not fully reflect the full impact of the Federal Reserve's increased 'liquidity' flood over the past several years
central banks have been suppressing the gold price and supporting the US$ and are now running low on gold
nearly all the world central banks are now printing paper currency to competitively devalue for trade reasons
gold mining production is declining as energy & labor prices impact earnings negatively
gold mines' internal infrastructures have been dismantled due to 20 year gold bear market
gold mines have not been adding to their gold reserves as exploration expenses have been curtailed
gold mines are mining their low grade (and more expensive) ores, saving their higher grades to extend their mining lives
consumer price inflation has not fully sunk in around the world - agricultural prices are yet to have the Shock 'n Awe effect on shoppers
an inflation-adjusted price of gold of over $2,000 must be achieved to reflect $700 gold of 1980
we have yet to see a panic resulting from a realization what the amero will mean to the purchasing power of dollar holders
general equity stock market investors have yet to realize that corporate earnings are rising due to 'inflation' and not real
multi-national earnings are being derived overseas & re-invested there as well, not in the American markets
A spike to $1,112 for gold may be our first significant resistance, a modest $ appreciation, then a powerful thrust upwards taking it to levels nobody can realistically imagine at this point in time.
Two more things. Stock market newsletter writer and legendary guru Richard Russell reminds us that the Dow Jones 30 average will cross the gold price at some level. Will it be at a Dow of 20,000 or 5,000? He also reminds us that stock market Price/Earnings - to reflect good value - should be in a range of 7-10. Right now the S&P P/E Ratio is at 16.84. In 2000, the Ratio had been over 44, so we've made some progress.
Right now my retirement account is still 100%% in precious metals mining stocks, all in junior producers/explorers with 85% in silver mines.
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