2019 has been an amazing year for the gold and gold mining stocks. However, the recent gold rally is far from over. The fundamental reasons behind an explosive gold run in the future were discussed in an earlier article 8 Reasons to Buy Gold and Gold Mining Stocks. This post is focused on the long term analysis of gold. First, I am going to share the opinions of gold mining industry leaders and experts in support of higher gold prices, then I will talk about the long term analysis of gold using Elliot Wave theory. Lastly, I will briefly talk about the short term perspective of gold price and how investors and traders can benefit from the exciting opportunities in the mining sector.
Gold Long Term Analysis: What Experts Say?
There are various opinions of experts regarding the long term analysis of gold:
Gold Could Explode to $25,000 Says Pierre Lassonde
Pierre Lassonde, chairman of Franco-Nevada is the voice of the mining industry. Lassonde told Kitco News on the sidelines of the Denver Gold Forum (DGF) that gold is in a good place as annual global gold demand has exploded in the past thirty years. Demand grew more than fivefold, from a value of $32 billion in 1989 to $177 billion in 2018.
The financial demand is being driven by negative interest rates. Should the U.S. Treasury 30-year bond yield ever, ever go negative, like in Germany and France, God bless, we’re looking at $5,000 gold.
Pierre Lassonde, chairman of Franco-Nevada
One of the highlights of Pierre’s presentation at DGF was his forecast for the price of gold in the next 30 years. Pierre said, after analyzing gold’s historical compound annual growth rate (CAGR) over the past 50 years, ever since President Nixon formally took the U.S. off the gold standard, that’s got to give us a pretty good idea of where the gold price is going to go. So, using CAGR from 1970 the long-term projection for gold would be $12,500 by 2049. Under the “right” conditions, it could go as high as $25,000. The bracket for gold is from $5,000 to $2,5000 with the average price sitting at $12,500.
Pierre is very optimistic about the mining industry and thinks that the next two to seven years are going to be incredibly interesting in the business.
Bill Holter Believes in $174,000 Gold
Here is another analysis by renowned gold and financial expert Jim Sinclair and financial writer Bill Holter that I came across today. It’s about $174,000 gold which looks quite scary and I don’t believe could come true in the next thirty years but adding here for reference. Sinclair and Holter are business partners at the popular financial website JSMineset.com. Sinclair explains,
‘When’ is the question we are asked constantly by our viewers and readers. . . . ‘When’ is a period of time all of this comes to fruition, meaning the date. . . .‘When’ is now. . . . This is the beginning of something few expect. This has very little to no precedent in history. . . . The system has been unwinding for a significant amount of time, but now is a point in time it is being recognized, especially by those enormous centers of wealth that have robbed so much from so many who are long fiat currency and must convert into something that is real. . . . If you are bankrupt, the way to fix it is to face it–and we are. We have not faced it, but rather made it worse. . . . The price of gold has to equal the liabilities. . . . If we don’t have gold, then it is whatever the price China and Russia wish it to be. If we do have gold, the mathematics works out to be slightly under $20,000 an ounce. I don’t believe we have the gold.
The $20,000 per ounce number would be just the debt foreigners hold. If you used the total (federal) debt of $21 trillion, the number is $87,000 per ounce. If you add the number of ‘missing money’ (from HUD and DOD) that Catherine Austin Fitts and Professor Mark Skidmore came up with of another $21 trillion ‘missing,’ you double that gold price. So, you are at $174,000 per ounce.
Gold Long Term Analysis: Elliot Wave Predicts $13000 Gold
The timing and price targets of gold for the coming years can be explained very well through the Elliot Wave Analysis. In my older post, I used the screenshot of the analysis posted by QuadG, a former member at the Kitco gold forum, in late 2015. Since the analysis was posted about five years ago, I had to update the chart to reflect the latest gold price. The bigger picture still remains the same, I am summarizing it below:
Major Generational Wave “<1>”
The gold cycle started in 1933 with the gold confiscation act in the USA that radically changed the way the US government was handling the valuation of gold. The value of gold was increased from around $20 to $35 dollars, which was a substantial move in an attempt to generate some inflation. That $20 bottom in 1933 was basically the start of a major generational wave “<1>” to the upside that lasted until the 1980 peak of $887. During that 47 years cycle, gold price moved higher by 33 times its bottom value.
Major Corrective Wave “<2>”
Then the major corrective wave “<2>” started in 1980 and lasted for 20 years until 1999 when the gold bottomed at $251 which was about 71% correction from the 1980 peak of $887.
Major Generational Wave “<3>”
A conservative estimate for major wave “<3>” of gold will be $8283 i.e. 33 times the 1999 bottom of $251. Since wave “<3>” has to be bigger than wave “<1>” in terms of price movement and duration, gold might reach $13401, 1.618 times the Fibonacci projection of $8283. The major wave “<3>” of gold was projected to take 47 years or more from 1999. So, we are still early on in this massive wave “<3>” to the upside.
From 1999 bottom the next upside move continued until 2011, it was a 12 years ride of 7.5x move from the bottom of $251 to the top of $1920. Since this move was smaller and took less time than the major generational wave
“<1>”, the last move can be considered as the sub-wave “” of a larger generational wave “<3>”.
The market and analysts have consensus that gold has seen its bottom at $1045, a 46% correction from $1920, and the corrective sub-wave “ of <3>” is complete and took about four years to complete in 2015.
The upward sub-wave “ of <3>” started in late 2015 and it is very possible, if history repeats itself, that we may see the gold price seven to ten times higher than its 2015 lows of $1045. The tenfold move in the gold price from 2015 lows will cause the price to soar up to $10450. When talking about the duration, applying the 1.618 Fibonacci projection to the previous 12 years bull run from 1999 to 2011, we still may have about fifteen more years to see the gold reaching the $10000 range.
Regarding the corrective sub-wave “ of <3>” we still have to observe the peak of the upward sub-wave “ of <3>.” Once the peak is confirmed we can again see a huge 40% to 50% correction in the gold price like before.
The final upward sub-wave “ of <3>” may end in 2046 when gold, after huge runs and correction, is expected to settle in the $13000 range.
The Elliot Wave story does not end here, as according to this theory, there should be another major corrective wave “<4>” and the final major generational wave “<5>”. If you are interested, you can learn more about Elliot Wave analysis here.
When Gold Will Reach $2000?
As I mentioned in my earlier article “Will Gold Surpass $2000?” in our own lifetime if gold can move from $251 to $1920 in twelve years i.e. from 1999 to 2011, why can’t it happen again? The reason gold is struggling to break its high of $1920 is that gold has been artificially suppressed for decades by Bullion Banks. There is no limit to the amount of “paper” contracts that can be created in order to “short” Gold. Central Banks “lease” Gold to Bullion Banks but no one ever takes physical delivery so the contracts are settled on “paper” and thus they can create an almost infinite supply of Paper Gold in order to suppress the price. The fair market value for Gold right now should be $5000 as many experts believe.
This monopoly in the gold sector is not going to last for long as discussed in “8 Reasons to Buy Gold and Gold Mining Stocks.” The price of gold will soon reach its fair value as we are already seeing the signs of an early bull market in the gold and gold mining sector. The same factors that caused explosive upward price movements in gold in the past will play their role in the future e.g. inflation, geopolitical conditions, etc.
Gold’s 2019 Breakout
Gold broke out of a critical 6-year base in June 2019 and established a new bull market. The correction that began in September is nearly complete, and gold should resume the uptrend in 2020.
For 2020, we expect gold to continue to advance the larger pattern and challenge key resistance between $1750 – $1800. Our current forecast calls for a pattern breakout above $2000 by 2021 or 2022. However, that timeframe could be expedited depending on the results of the 2020 election.
AG Thorson, Gold Predict
How to Benefit from Rising Gold Price?
Even though gold mining stocks have shown an awesome performance in 2019 compared to the physical gold, we are nowhere close to the maximum historic price levels in the junior mining sector.
- If you are an aggressive investor, invest in quality mining stocks with top-class assets and a great management team. Gold mining stocks had a wonderful year in 2019 and will continue their run in 2020. I discussed some undervalued gold mining stocks including RNC Minerals Corp (TSX: RNX), Euro Sun Mining Inc. (TSE: ESM), and American Pacific Mining (CSE: USGD) in my article “ten gold mining companies that can offer great short term returns”. There are many more mining companies I am watching that are very undervalued and I am continuously searching for new opportunities. If you want to stay updated about the new opportunities please subscribe to my mailing list:
- Silver and Silver mining stocks generally tend to outperform gold and gold mining stocks. So, investing in silver mining stocks also can be very beneficial, but currently, my portfolio has more exposure to gold than silver mining companies.
- If you are not very knowledgeable about investment and trading, a better option would be to buy mutual funds with higher exposure to the mining and/or resource sector.