David McAlvany to Moneynews: Gold Poised to Surge to $5,000

Monday, 20 May 2013 12:39 PM

By Glenn J. Kalinoski and John Bachman

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The recent plunge in the price of gold is no reason to avoid the precious metal because it is poised to potentially soar to $5,000 by 2016-2017, says David McAlvany, CEO of the McAlvany Financial Group.

"It's probably time to double down, particularly in the physical metals," he said in an exclusive interview with Newsmax TV.

"This is an appetite that needs to be fed, not squashed. If you thought that it made sense to own gold at [$1,500] or [$1,600] or $1,700, just remember that the fundamentals haven't changed at all."

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Spot gold hit a low of $1,338.95 an ounce on Monday, its weakest since April 16 but later rebounded to above $1,380.

Editor's Note: Get David Skarica's Gold Stock Adviser — Click Here Now!

He went on to cite central bank balance sheet expansion of more than $9 trillion.

"That would buy a flat screen television for every man, woman and child on the planet," he said.

"We have already the ingredients for a super, hyperinflation. The fact that there's no indication of inflation has to do with the transmission mechanism into the economy being broken," he said.

"We're closer to a serious inflation than anyone really appreciates."

While noting gold being down for 19 months, he cautioned that investors lack perspective.

"When things are going up, they extrapolate and say they'll go up forever," he said. "When things are going down, they extrapolate and say they're going down forever."

He said the contrarian makes money by stepping back from the crowd and saying, "Is there another way of looking at this? Have we checked the fundamentals of the market?"

He described the market as being "very healthy" in terms of supply and demand.

"The swoon that we saw below that $1,530 level in the gold price had everything to do with, you could say to some degree, chicanery," he said.

"Technically, you were at a point that needed to be held and you had some massive liquidations come in, not of physical metals, but in the futures market. There's been technical damage done, but I would remind you, we [had] the same kind of technical damage done in 2008 and we had the same kind of technical damage done in 1976."

McAlvany said in 1976, you could read any newspaper across the country and they would have said the gold bull market is over, the dollar has stabilized, there is no inflation — and all the reasons that you would want to own gold have vanished.

"They described in a Time magazine article in 1976, the reasons for owning gold, the luster of gold now looks more like a rusty tin can," he said.

"This is in '76 [with] gold [at] about $105 on its way to $875. People extrapolate again from a short-term trend and on a technical basis, decide that they have somehow read the tea leaves and know what the future holds. You look at the fundamentals and you've got a very different picture," he said.

"I would suggest that by the time we hit 2016, 2017, that time frame, gold is well above $3,000 on its march higher to $5,000 at a minimum."

McAlvany covered the fact that Americans require an increase in incomes.

"If you adjust for inflation, U.S. average median income is about where it was in 1995," he said. "There's not a thing that you can purchase in my world and perhaps in yours, too, that costs the same as what it did in 1995."

He also thinks the stock market can continue to climb to new records.

"In a world of money printing, there's nothing that says that equity prices can't move up considerably from here," he said.

He asked why insiders are selling at a record rate.

"This is corporate CEOs of your Fortune 500 companies liquidating positions," he said.

"Insiders are saying to themselves, 'A bird in the hand is better than two in the bush.' You need to proceed with caution. The professional investor's going to squeeze out another five or 10 percent, but the man on the street: this is where you get squashed like a bug."

Editor's Note: Get David Skarica's Gold Stock Adviser — Click Here Now!

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