written by reader Gold vs Dollar. Edelson vs Dent

By freejon, June 9, 2014

Right now I am receiving promotions from two sources.
One is Larry Edelson (via Weiss) who claims a good track record in forecasting gold and precious metal movements. He says that the bottom for Gold is fast approaching and that the coming conditions will send it to $5000 in three years, citing ”War cycles” that will run until 2020 as the core reason.
The other is Harry Dent, king of the demographics, who shows all the ”bubble” graphs, a description which also applies to the shape of gold prices. He makes a strong economic argument that we are about to experience major deflation. While others expect the money-printing to eventually trigger inflation and a dollar collapse, Dent says that we would be in deflation if it were not for QE and that the end of QE will see the start of massive deflation. He also says that the dollar will not collapse because all other major countries have also done QE, so there is a ”race to devalue” in place which the dollar will survive, relative to other countries. He sees a gold price that will be half or less, in the same timeframe that Edelson says will be triple.
They can’t both be right- can they?

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Foolster
June 29, 2014 5:34 pm

John Mauldin has coined the phrase muddle through recovery. What is going to happen is that they are both wrong. Gold is a commodity that costs about $800 per ounce to get out of the ground. At $1200-$1300 per ounce numerous new mines are opening. So as the new mines start operations the price is going to drop until some of the mines close. I see gold as being stuck trading between $2000 to $1000 per ounce for the foreseeable future. When it approaches the low end buy the junior miners. When it approaches the high end sell the junior miners.

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Bob W
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Bob W
July 17, 2014 12:26 am

Actually most gold miners are struggling to make a profit with gold at $1300, when you count all the costs. That’s why their stock prices are in the toilet. However, with gold stocks above ground vastly exceeding the quantity mined each year (a situation very different from base metals) new gold mined could stay at low levels for a long time without driving the price up — most demand is met by moving gold from one bin in a vault to another. Nobody has a crystal ball for gold prices, although $5000 in three years sounds like a good prediction to bet against.

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Christopher
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Christopher
September 24, 2014 2:57 pm
Reply to  Bob W

I partially agree and disagree with above two comments.

Mining costs for most gold mines are near or at current gold prices. Silver costs are more variable among different minies but most silver mines are multi ore mines, and lower resource prices of other minerals currently drag down profits – a situation unlikely to change near term without explosive world growth – don’t see it. The mining industry has been forced by shareholders to an all-in-costs accounting approach including development and overhead, and some mines are below profit breakpoint.

There are three impediments to sharply higher gold prices in the next two years – all political: 1) Major governments are all printing money be it in differnt ways, including China, and will not from their perspective let gold get the upper hand, 2) China is just starting a gold exchange but the effect will be slow – besides China (and Russa) want more time to accumulate gold at lower prices, and are working at slower, long term defusing the dollar through non dollar trade relations (note the unusual – private, not government – depressant accounting accusations & actions against Silvercorp these last five years; it has its major mines in China, supposedly a good relation with that government, silver costs at MINUS $5.00/oz because of other mined metal credits – AND YET its price has been driven down from a peak of $15 in 2011 to $1.60 today – yet it still shows a small dividend. How does that all fit?), and 3) governments have shown, when desprate (as in the US which has no gold in Fort Knox and little at the Fed from decades of gold price depressing – ask workers or a waitress in the town near Fort Knox), the ability in many ways to defuse gold’s value even short of confiscation — fostering constant wars that boost the war economy, expanding mining regulations & moratoriums, royalties [which apply pretax], and windfall profits taxes, declaring nationalization of mines, and creating defacto confiscation of much gold without doing so – asserting property OWNERSHIP of official government minted coins, declaring them worth only face value and criminalizing thrade otherwise]. The G-20 and banking elite are increasingly coorinating as to governments power, and are not going to let individuals regain power over out of control government easily. We have to take the Chinese long view of patience and non self-destructive, non violent persistent protest in ways that are effective – including investing in real (hard) assets generally. As Louie B. Mayer of MGM fame used to say, “include me out”.

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devlinn
devlinn
June 5, 2016 6:26 am
Reply to  Christopher

It was Samuel Goldwyn, head of Goldwyn Studios, formerly of MGM, who said, “Include me out,”

Rick M
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Rick M
December 14, 2014 6:14 pm