 Casey Files:
How to Calculate Your Own
Gold Price Projection
Jeff Clark
Managing Editor - BIG
GOLD
Casey Research
Aug 8, 2008
It's true for almost any commodity:
there are a lot of influences pushing on the price, and it's
hard to untangle them all. But gold is exceptional. A single
factor dominates the market price - and you can measure it.
More than any other commodity,
gold's price rises (and falls) with demand from investors; the
demand from consumers and industrial users is very much a secondary
consideration. Or to put it another way, what ultimately controls
gold is mass psychology.
If you were an investor during
the internet craze, do you recall the absolute hysteria about
Nasdaq stocks? Do you remember how everyone knew about
them? Do you recall the excited banter about the latest internet
company you heard at work, at home, or with friends? Do you remember
the stories of people getting rich almost overnight? I still
remember a news report saying that local officials at Lake Tahoe
were worried because all the dot-com millionaires from Silicon
Valley were buying up lakefront property and building wall-to-wall
mansions, blocking everyone else's view.
Those companies weren't really
worth 400 times earnings, and many had no earnings at all. Yet
most such stocks didn't just double or triple, but increased
by a factor of 10 or more. There were internet stocks that went
up 100 fold.
Is this happening to gold right
now?
Hardly. The general public
is nearly indifferent to gold - which is evidence that the Mania
stage is still in front of us, and it foretells the kind of hysteria
that will come as the economy's troubles deepen. Except that
tomorrow's mania for gold investments will be stronger than yesterday's
mania for internet stocks. With gold, we won't just have the
greed factor, we'll also have the fear, or flight to quality,
factor banging on the price.
If this is true, is it possible
to project how high mass psychology could push gold? And just
as importantly, is there a way to determine when you should sell?
Predictions abound, but talk is just too easy. So I've devised
a simple method for you to calculate, for yourself, where the
price of gold will peak, so you'll know when to sell.
To get your personal gold score,
take this 2-minute quiz about what you read and what you hear
from the people you know. Here's the key to score each answer
you give:
- If an answer is zero: Score
1 point
.
- If an answer is between 1%
and 10%: Score no points
.
- If an answer is above 10%:
Take away one point
Personal Gold Score Quiz:
- Of all your family members,
what percentage have told you they own gold in any form?
.....Nobody: Score 1.
.....Some but not more than 10%: Score
0.
.....More than 10%: Score -1. [Minus 1]
.
- Of all your friends, how many
have told you they've purchased gold or gold stocks? Score
1, 0 or -1.
.
- Of all your co-workers, how
many have discussed anything positive related to
gold? Score 1, 0 or -1.
.
- Of the neighbors you talk
with regularly, how many have initiated conversation about
any topic centering on gold? Score 1, 0 or -1.
.
- How many conversations have
you had with any other party (at work, at a gym, on an airplane,
after a religious service, etc.) who spoke positively
about gold in any way? Score 1, 0 or -1.
.
- Excluding any gold-related
websites or publications you regularly read, what percentage
of all the materials you read (magazines, newspapers, online
articles, etc.) discuss gold in a positive way? Score
1, 0 or -1.
.
- What percentage of the investment
vehicles available through your company's IRA, 401k or other
retirement plan include something explicitly related to
gold? Score 1, zero, or -1.
Add up your score, and then
multiply it by gold's current price (let's use $900 per ounce).
And there's your personal forecast for gold's price peak. Excluding
my co-workers at Casey Research, my total was 5, which gives
me a personal gold forecast of $4,500. So maybe, just maybe,
I'll be selling when gold hits $4,500.
Of course, this is hardly a
precise or scientific way to calculate where gold is going. But
it draws on a critically important point, and I bet you're thinking
the same thing I am: I know hardly anyone who owns gold!
Which means, of course, there are a lot of people who have yet
to buy it.... and a lot of funds that have yet to include it...
and a lot of magazines and newspapers that have yet to cover
it. Which means there's a long way up for gold yet.
Recall the internet craze,
substitute gold in its place, and voila - it's easy to see how
gold goes to the moon on mass psychology alone. I'm confident
that day is coming.
The current dip is calling.
Will you benefit from it?
Jeff Clark is the editor of
BIG
GOLD, a Casey Research publication that pinpoints the safest
ways to capitalize on the gold bull market. The next issue includes
an interview with Doug Casey; learn what made Doug such a spectacularly
successful gold investor, and where he sees gold and gold stocks
going in the near future. Try a 3-month risk-free
trial here.
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