Archive for July, 2013

Gayatri Mantra

Sunday, July 14th, 2013

Gold trend prognosis July 2013

Wednesday, July 3rd, 2013

Below is a logarithmic chart of historical price of gold from 1950 to 2013. Average, not maximum, yearly prices were plotted. Averages are taken on each year’s 12 months price points:


As one can see from the trendline #4, average yearly price of gold so far has reached two peaks – in 1980 and 2012. The question to be asked, is, what is the nominal price of gold assuming economy is not under threat and armageddon scenarios are not in effect? There could be two possibilities. Either the real prices of gold are represented by either of the two lower trendlines (#1 & #2), starting from point of time when gold standard was removed, OR the nominal price of gold is represented by the middle trendline #3, which corresponds to the price levels of 90s, when economy was booming and general population as well as average investor folk did not see the dot-com boom busting. After reaching 1980 peak, gold prices were declining up to the beginning of 2000s, because a solution to 70s economic troubles was found. Analogously, if a sustainable solution is found this time around, it would be natural to assume that gold prices will even out at some point of time with the nominal price at trendline #3, following trend represented by line B?, which parralels the trend represented by line A. Thus (again, if sustainable solution is found for the economy) the gold prices will go down, not up, and reach levels of about 750 dollars an ounce by year 2033. At this point the gold prices may stabilize and follow it’s inflationary price trend. If this scenario takes effect, this would mean that currently gold is significantly overpriced by a factor of about 4:1. In case a sustainable solution is not found, and various unpredictable “black swans” take a hold of the economy, gold may continue to rise breaking the trendline 4. However, I estimate that the probability of this is currently low. Hence,
at least in the short run (time range from 6 months to a year) gold prices should still be trending down. If this status-quo persists, gold should decline over a longer time range as represented by the trendline B?.



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