Investors flocking to gold as a safe haven can expect a hefty return since the precious metal could easily be worth more than $5,000, says columnist Martin Hutchinson.
“It sounds like a gold bug’s dream," says the Reuters Breakingviews columnist. "But looking back to the last inflation-adjusted peak price in 1980, it’s far from impossible that the gold price could soon go above $5,000 an ounce.”
Gold recently traded at about $1,179.80.
In 1980, gold appeared to be expensive at $875 per ounce. Since then, economic expansion worldwide has grown at least sixfold, Hutchinson said.
“Scale up the peak 30 years ago by that multiple, and the gold price could top out at around $5, 300,” he said.
Gold should be viewed as simply another option to money, Hutchinson said. The supply of money has also increased vastly, similar to the amount of gold supply.
“Scaling up by money supply and deflating by the gold supply, the 1980 peak price would be equivalent to about $5,700 an ounce today,” he said.
The price of gold could continue to “spike” as currencies worldwide are debased as more money is printed by governments, Hutchinson said.
“Of course, there is a considerable chance that gold and other commodity prices will peak at a lower level. But if a four-fold increase over a couple of years from today’s gold price to more than $5,000 an ounce seems impossibly extreme, that was the trajectory in 1978-1980,” he said.
Prices for gold are expected to increase even more, TheStreet.com reported.
“I guess there are a lot of people at the moment looking to cash in on their profits and certainly we'll see maybe bit of a downside towards gold," says Toon van Beeck, senior industry analyst at IBISWorld.
"But overall ... there's much more positive investor confidence out there towards the gold environment which is going to push prices up further.”
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