Friday, May 14, 2010
Gold again. Rosenberg provides some interesting benchmarks.
Rosenberg, 5/14: Believe it or not, $3000 an ounce on gold may yet prove to be a conservative forecast. If the gold price to world GDP ratio were to ever scale up to the peak three decades ago, it would imply an ultimate peak of $5,300 an ounce. Even better if the relationship between gold and the M3 money measure where to revert to the 1990 high, gold would move to $5,700 an ounce. A more cautious projection would merely put gold on the same footing as the CPI, and heading back to the previous peaks in this ratio would suggest $2,300 as the peak in gold — only a double from here. Or perhaps the gold price-M1 ratio is one that should be considered and even here gold would go to $3,100 per ounce under the proviso that prior highs get reestablished. For more on this fun-with-figures analysis of how far gold can go, see Why We May See Gold Hit $5,000 on page B2 of the NYT. [Free subscription rqd for Rosenberg; subscription required for nyt]