A volatile ride ahead to far higher gold prices
A sharp increase in gold price volatility from the second half of 2011 suggests gold is due for a major surge to perhaps as much as $4,000/oz by 2015, at which point growth could turn explosive.
Posted: Tuesday , 06 Mar 2012
Woodland Hills, CA -
In a January 2012, 32 page booklet called "Is Hyperinflation the US Government's Only Way Out"*, I compared the gold rally of 1977-1980 with the current rally in Gold. I discussed the three major phases of Gold's 1977-1980 movement (from $134.50 to $850) and the gold rally that started in 2001. In August of 2011, I said that we have entered Phase 2 of the gold rally, based upon the dramatic increase in volatility.
WHEN DID PHASE 2 OF THE GOLD RALLY BEGIN?
Looking at trading from 2010 and 2011 it was easy to see. Between Jan 1st of 2010 and July 31st 2011 (577 days), gold traded between $1,121 and $1,628 per ounce. There were only 8 days (1.3% of the 577 Days) when the gold price increased/deceased more than $30, and 0 (zero) days with a move of $40 or more. Between August 1st and Dec 31st 2011, there were 153 days when gold traded between $1,520 and $1,920 per ounce, and there were 34 days (22% of the 153 Days) when gold increased/decreased more than $30, with 8 days when the move was over $50 (including 2 days when the gold price moved more than $100 in just 24 hours.)
WHAT WILL RESULT FROM PHASE 2 VOLATILITY?
I believe that in Phase 2 of the current gold rally we will see the average annual gold price increase over the next 3 years, surging from the 20% average of the past ten years, to 40%. Gold will reach $4,000 per ounce by 2015 before we get to the final Phase Three, when the gold market explodes.
PHASE THREE WILL BE SHORT AND EXPLOSIVE.
Back in 1980, Phase Three only lasted for 21 days, but the gold price increased 66% in that time span. Considering the ten year time span of Phase One, and my projection for Phase Two, I feel that Phase Three (which would start in 2015) will last for six months and drive gold up to over $6,000 per ounce. If the world's financial leaders decide to return to a Gold Standard, or if gold bullion confiscation becomes the government's reaction to severe inflation, my projections would escalate. Possible other government reactions that can affect these projections negatively are: limiting gold ownership, restrictions on transporting or trading, and any gold windfall profits tax.
Barry Stuppler has enjoyed a 50+ year career as a professional in the precious metal and rare coin community. He is the current president of the California Coin & Bullion Merchants Association and of Stuppler & Company, a major gold and silver wholesaler. Barry's Weekly Market Report is available at https://www.mintstategold.com/investor-education/cat/markets/