Warning! Gold Could Drop Below $500

500Bay · November 2, 2010 8:06AM

A view from the "Motely Fool"

Gold Could drop below $500

Joflax · November 2, 2010 9:19AM

Wow!! , He has been watching the market since 2009 , I think I will sell while the going is good

Same old story rehashed by all those pundits that didnt buy gold over the last 10 year bull run

jmski52 · November 2, 2010 9:31AM

Yeah, it could drop if everything starts to good right in the economy and the world. Let me know when Congress stops spending, then we'll talk.

piecesofme · November 2, 2010 9:37AM

not everyone had the $ to buy when the gettin was good. I think theres far more people that have bought in the $1200 range than in the $265 range 10 years ago today. If I was in the $1200 and heard this run is over and could go back to $5-700, it would gte my attention.
I'm in the group that doesnt hold it long enough to care what it does as long as i can sell it for more within a week or sooner.

We all gotta do what works for each of us. There is no right or wrong answer imo. If I really thought Au was headed down really sharply, I'd buy some Puts, but I dont think it's going down far enough to risk it.

TWQG · November 2, 2010 9:52AM

Considering the industry average to produce an ounce of gold is around $800 now, I find that price target highly unlikely.

30AnvZ28 · November 2, 2010 9:57AM

<< <i>Considering the industry average to produce an ounce of gold is around $800 now, I find that price target highly unlikely. >>

+1. And it will most likely NEVER get any cheaper. Almost impossible to.

roadrunner · November 2, 2010 10:52AM

This huckster is trying to make a comparison using a gold history from 1851-2010! What sense does that make? We were on various degrees of a gold standard until 1971. The author just mentions as a quirk that the "ONLY" time gold went "nuts" in this 160 yr period for any length of time was from 1971-1980. And that's precisely the point. That's when the game
changed and the world went pure fiat. That quirk was the first round of several to come. But Volcker and his crew were able to kill gold for 20 yrs with higher interest rates, a roaring stock market based on ever increasing speculation and exported inflation, exponentially increasing 401K's, and then later on via a gold carry trade, central bank gold selling, and derivatives. Thing is, the first round is rarely the most impressive. 1971-1980 was the warmup act. Gold has been behaving "badly" the past 10 yrs only because the fiat currencies are heading to zero. The author just has the bubble source inverted.

Yes, gold could fall to $500. It's also possible it could rise to $3650. I'll leave it to each person to decide which of those 2 outcomes is more likely or which will be closer to the end result over the next 2-6 yrs. For gold to hit $500 in the near future one of these options must occur:

1. A return to the 1980's with much higher interest rates, a strong dollar, a vibrant growing economy, and nations fighting over us to see who gets to buy our debt.
2. A major deflation that takes down everything including PM's. At $500 gold expect a DOW of <2,500.
3. Technology discovers a way to find gold much easier using external sensors and also the means to extract and process it much cheaper than today. Either that or we're visited by aliens (or the star ship Enterprise) who already have discovered methods to convert gold from base metals.

roadrunner

notwilight · November 2, 2010 10:58AM

Has/have the guy/guys who write(s) the Motley Fool hit 30 yet? --Jerry

jmski52 · November 2, 2010 12:16PM

Has/have the guy/guys who write(s) the Motley Fool hit 30 yet? --Jerry

Could be.....but in his wisdom, he takes an average price of gold since 1850, without any consideration of money supply or debt. Interesting outlook.

As far as being a bet on a specific scenario, I guess you could say that - but it's not really the scenario he proposes (double digit inflation) so much as it is a loss of confidence in the currency.

Hey, I bet he even thinks that we're all Keynesians now.

renman95 · November 2, 2010 2:27PM

Hey, I bet he even thinks that we're all Keynesians now.

>>

We live in Keynesia?

HalfStrike · November 2, 2010 4:57PM

I think his point that gold has returned close to zero when adjusted for inflation is close to being accurate, the analogy that you could buy a nice suit with an ounce of gold has held close. Where this analysis goes into the can is where he compares the gold standard years to the current years as though they are the same.