Gold’s price was one of 10 forecasts that I made in my “Class of ’63” column in the Jan. 27 Numismatic News.
I pegged the metal at $600 an ounce, far lower than the current price, because I feel that gold cannot remain an outlier while the price of most other commodities is falling.
A colleague decided to base one of our poll questions on this forecast and that increased the rate of response to me.
Naturally, most readers have disagreed with me. A few concurred with the idea of an annual price decline, but thought I had been too aggressive in choosing $600.
We have more than 10 months to go before we can assess the accuracy of the forecast. I am sticking to my guns.
I am not oblivious to the fact that gold is knocking on the door of $1,000. There are a lot of panicked buyers out there. If I owned Russian rubles, Polish zlotych, Argentine pesos or any number of other currencies, I would consider gold a welcome harbor in the economic storm.
However, my point of reference is the U.S. dollar and it is this currency that I use as a yardstick.
Simply put, the present crisis is destroying more purchasing power around the world than the U.S. government is creating with its massive increase in government loans and money supply increases.
Also, when people get scared, one of the reflexes, especially if they don’t buy gold, is to hoard cash. This increases the demand for dollars and sops up much of the extra supply created by all of these bailouts.
That’s my logic. I could be wrong, but that is the fun of forecasts. They are mine, but that doesn’t mean I don’t enjoy seeing what others are thinking. Anybody who is aware of the financial crisis can’t help but have thoughts on this topic.