In one of several very interesting panel discussions at the World Gold Investment Congress section of Terrapinn’s World Commodities Week in London this past week, James Turk reiterated his opinion that gold could climb as high as $8,000 – based on simple mathematics.  In the 1970s, he pointed out, gold rose from $35 to $800 at its peak and he sees no reason why in the current period history shouldn’t repeat itself by taking it from around $350, as it was in 2003, to around $8,000 by perhaps 2013-2015 in the current bull run, which many observers feel is only in its mid-stages.

However, investors who follow this advice also need to be aware that when the spike to over $800 came in early 1980 it came very quickly, and then the price receded back to around $490 very fast too – a far more volatile reaction than many would find comfortable to live with.  Subsequently gold rallied again to around the $700 level before collapsing into a bear market from which it did not really emerge until the early 2000s.  There are certainly those out there who believe that a similar fate may be in store for current gold investors – the difficulty would be picking the top when it eventually comes, as it surely will.  Gold is unlikely to go on up for ever.

Turk is obviously, and probably always has been, one of the most bullish proponents of the gold story and his opinions have been strongly borne out so far in the latest runup in gold price.   He also believes that the U.S., and by association much of the rest of the old major economic bloc, is on the road to hyperinflation – a gloomy premise for the world’s middle classes who, in the past, have been virtually wiped out economically in countries where hyperinflation has occurred.  He sees this as the ultimate consequence of the virtually indiscriminate printing of paper money, under the politico-speak of Quantitative Easing and sees holding physical gold and silver as one of the few options for protecting one’s wealth against the perils of the massive inflation being predicted.

Also participating in the panel discussion was Chris Wyke of global asset management group, Schroders,  who was almost equally bullish on the prospects for gold in the current environment, although perhaps less comfortable with the extreme price rise and hyperinflation scenario espoused by Turk.  Both panellists, though believe that Quantitative Easing programmes, of which we are almost certainly about to see another tranche, will inevitably ultimately lead to serious inflation and be beneficial for precious metals prices – it is only in the degree where there were differences.

An earlier very interesting panel discussion, which went on rather longer than planned, involved Kit Juckes, chief economist at the ECU Group and Chris Watling of Longvierw Capital.  The discussion here revolved more around the macro-economic situation, but came to some of the same conclusions.  Here it was felt that the dollar was definitely on the decline, but then so were most other old world currencies and that gold was likely to at least retain its value in all of them.  The subject was primarily whether the gold price has a direct relationship to inflation – and the conclusion was that it did not specifically – it seems to perform well in a times of economic uncertainty whatever the prevailing monetary trend – inflationary or deflationary.  It was also felt that although from time to time gold may have an inverse relationship with US dollar strength, this was also not necessarily true in the longer term.

Both felt quantitative easing was not the answer to global economic problems and that interest rates should rise even if this causes more short term hardship.  Both felt that the U.K. government’s current policy of trying to wipe out the country’s indebtedness over the next few years was the right policy and by implication that other countries should follow suit.