How does gold develop

Forecast for the gold price

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Basic assessments of the gold price

Few of them foresaw the upturn in precious metal prices after the turn of the millennium (such as Markus Mezger[1]). There were comparatively many who later dared to look into the future. The next table provides an overview of the assessments of gold market experts on the development of the gold price up to the presumed peak of the current commodity and precious metal cycle, which is expected to be reached in the course of the second half of the current decade.

Gold price forecasts by gold market analysts

Person / institution

US $ per troy ounce

Uwe Bergold (GR Asset Management)1

5.000

Yan Chen (Standard Chartered)2

5.000

Folker Hellmeyer (Bremer Landesbank)3

5.000

Harald Weygand (GodmodeTrader)4

5.000

75 other analysts with forecasts of ...5

... at least 5,000 to 20,000

Source: 1 Cash-Online.de (2009), The Gold Will Go to $ 5,000 / ozt. - or More! (Internet: munknee.com/ 2011/06 / update-these-90-analysts-believe-gold-will-go-to-5000ozt-or-more, accessed on October 1st, 2012).

Achieving a Gold price of at least US $ 5,000 per troy ounce of gold actually only requires that the subsequent ones Trends continue roughly as expected:

  • Continuation of the current Commodity and precious metals cycle,
  • increased awareness of the Finiteness of resources,
  • further Loss of confidence in the paper money system,
  • further increasing Investment demand.

The following are Relationships between the gold price and some financial market sizes numbers, which indicate that the upward movement still has a lot of room for improvement: [2]

  • The Share of gold and gold mining stocks of world financial assets was 28% in 1921, 20% in 1932, 30% in 1948 and 26% in 1981. At the end of 2009, the share (including ETFs) of global financial assets of just under US $ 200 trillion was just 2.6%. To achieve the same percentage as in 1981, the price of gold would have to rise to US $ 12,000.
  • To the Money supply MZM[3] of the 37 most important industrialized countries in the world to the amount of 53 trillion US $ (2009) with their central bank gold would be necessary, a gold price of 58,000 US- $ would be necessary, if the total gold available worldwide could be used, it would have to be 13,000 thousand . US $ increase.
  • 1980 was the US money supply M1 covered to 45% by central bank gold, in 2009 still to 5%. The price of gold would have to rise above $ 10,000 to reach 1980 coverage.
  • Government, bank and corporate bonds amounted to US $ 92 trillion worldwide at the end of 2009. The price of gold would have to rise to almost US $ 60,000 in order to be able to completely cover the bond market with the gold available from central banks around the world.
  • In 1938 55% were the US debt Covered by the gold holdings of the US Federal Reserve, at the beginning of the 1980s 17% and in 2009 - despite the gold price having increased fivefold since 2001 - only 0.6%. The price of gold would have to rise to US $ 200,000 to break the US household, government, corporate and bank debt of US $ 52 trillion (3.7 times US GDP in 2009) To be able to cover US Federal Reserve holdings.
  • The worldwide Derivatives volume amounted to US $ 690 trillion at the end of 2009 (mid-2006: US $ 260 trillion) and thus 10 times the world real estate wealth at the time, more than 10 times the world gross domestic product, 14 times the world equity wealth, the 125 times the value of total physical gold and 1,750 times the value of global physical silver.

The diagram shows the development of the gold price since 1900 and the possible development in the coming years. A logarithmic functional form was chosen because it clearly shows the relative change. We are already well past the US $ 1,000 mark. Until the US $ 5,000 mark is reached, all that matters is the remaining increase on the right-hand edge of the graph.

Gold price development

Source: Own calculations and representation based on information from Markt-Daten.de (Internet access, from 01.06.2012).

In the 1970s, the price of gold rose 24 times (from $ 35 to $ 850). In relation to the low of US $ 250 in 2001, it would only have to rise 20 times to reach US $ 5,000 per troy ounce of gold. The intermediate high of the gold price of 1980 (nominally US $ 850), deflated by the official inflation rate, corresponds to a current one Real value from $ 2,300. If, on the other hand, one deflates with the calculation method applicable in 1980, the real value is $ 7,500. The mean of these gold prices, adjusted for inflation using different methods, is US $ 5,000. According to calculations, a gold price of US $ 5,000 would also be required to significantly expand the reach of underground resources. [4] Gold prices of US $ 5,000 can also be derived using the Eeden-Müller gold price theory and the Dow gold ratio and the gold-oil ratio.

Continuation of the basic knowledge of gold and silver

Origin, occurrence and extraction


History of precious metals as currency


Supply, demand and stocks


Historical performance


Forecast for future performance


Investment opportunities


Summary

 

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[1] Cf. Mezger, M., M. Stahl, R. Reichert, G. Single and M. Krauss (2000), Silver - Brilliant Comeback of a Precious Metal. Baden-Württembergische Bank, Stuttgart (Internet: goldseiten.de/content/kolumnen/download/bwb-173_silber.pdf, accessed on October 1, 2012).

[2] Cf. Stöferle, R.-P. (2010), In Gold we trust (Internet access from October 1st, 2012): pp. 21 and 71; Schulte, T. (2010), Silver - the better gold: pp. 21 and 148.

[3] See Wikipedia, Money Supply (Internet: de.wikipedia.org/wiki/Geldquote#cite_note-2, accessed on October 1, 2012). - The money supply MZM (money of zero maturity) consists of cash, current, savings and private money market accounts as well as institutional fixed deposit and money market accounts.

[4] Cf. Stöferle, R.-P. (2009), In Gold we trust (Internet access from October 1st, 2012): p. 21.