Not sure how much more “radically undervalued” gold could be than it is today. The bullion banks and “market makers” are doing their level best to ensure the undervaluation remains in place – and possibly moving lower.
Against growing crude prices gold is significantly cheap and presents a good buying opportunity, according to Leigh Goehring, managing partner at New York-based firm Goehring & Rozencwajg Associates.
The analyst compared the current situation to the one gold and oil markets experienced 20 years ago. “Back in the first quarter of 1999 oil was $11 a barrel, gold was almost $300. So an ounce of gold bought 30 barrels of oil, which at our long-term modeling of golden oil that made gold very-very expensive,” Goehring said in an interview with Kitco News.
The expert highlighted that back then prices for crude went all the way up to $35 within 18 months, whereas the precious metal went from $300 down to $250.
“At the end of 2000 oil was at $37, gold had fallen down to 275, and at that point an ounce of gold only bought seven barrels of oil. It became radically undervalued,” he told the media. “And what had happened over the next two years? Gold stocks were up 500 percent in the next three years and oil stocks did almost nothing.”
“Oil will continue to do well. If oil were to go to $100 a barrel and gold were to stay at these levels, we’re getting down to that undervalued area of 10 to 1, where an ounce of gold only buys 10 barrels of oil. At that point I believe gold will be radically undervalued and will take off,” Goehring said.
Will oil make it to $100 a barrel in the near future? We have been saying that gold is going higher, and based on what some of the smartest investors around have been saying, gold stocks should begin to move higher as well.
We recently reported on collapsing mine production and the stagnate U.S. Mint sales of both gold and silver. This is usually a great set up for the metals and resource stocks to move higher. We are not, nor have we said, this is going to happen overnight, we have been saying over the next 3-5 years we believe both metals and some of the high quality mining stocks are going to move higher based on all the analysis produced over the past year or more. We are not making any recommendations to acquire anything, e.g. metals or stocks, we are simply echoing what a number of other analysts have been saying and reporting our findings.
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