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Why Gold Is Not Yet At Its Peak
 | By Patrick A. Heller
March 03, 2008 |
The price of gold has nearly quadrupled since 2001. I see several reasons it still has a long way to rise:
- Widespread negative sentiment about gold. Many investment gurus and gold market specialists are calling for a major correction in gold's price. Typically, an investment peaks when almost everyone touts it Analysts report that the bullish/bearish gold sentiment report is about 50/50 now. We won't be near a peak until the bullish sentiment is at least 80 percent.
- Rising gold demand. With higher prices, gold jewelry sales, as measured by weight, have fallen. As this is the largest usage of gold, some analysts expect the price to fall. These analysts miss the soaring demand for investment and inflation-hedge gold, which more than offset this decline.
- Shrinking gold supplies. Credible research reveals that central banks and governments may have surreptitiously sold or leased up to 50 million ounces of gold annually for years to hold down prices. Consequently, there is relatively little left to unload. Gold supplies are dwindling more than most investors and "experts" realize.
- Misunderstood gold prices. In raw price, gold has passed its January 1980 peak. Adjusted for inflation, however, gold would have to top $2,000+ to genuinely reach all-time highs. At today's levels, gold is less than half of 1980's peak.
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