Two global gold-price forecasters sense a $2 300/oz long-term gold price.
Seasoned forecaster Dundee Wealth Inc chief economist Martin Murenbeeld and US Global Investors precious-metal-fund comanager Ralph Aldis both cite the exact same long-term $2 300/oz figure, Murenbeeld explaining that the $850/oz gold-price peak of January 2008 translates into a $2 300/oz peak in today's money.
"My feeling is that, over the long cycle that we're in, gold will take out that $2 300/oz, but that's not tomorrow, I am speaking down the road," says Murenbeeld.
Aldis says: "We'll see, but I think, in the longer term, you're talking gold as a fairly safe investment, and it wouldn't surprise me to see gold go back, on a inflation-adjusted basis, to $2 300/oz."
For 2009, Murenbeeld's majority scenario is that the gold price will be at a level above $1 100/oz by year-end.
"We're in a gold uptrend, I am absolutely convinced of that, but the price rise does not necessarily happen as quickly as investors might hope or want," he cautions.
Murenbeeld reminds investors that it took 16 months for gold to take out the uptrend to $725/oz and he believes that it may take a while again before gold goes beyond $1 000/oz.
Like most commodities, gold, he says, goes through long cycles, its shortest upcycle being ten years.
"In the long uptrend that we are projecting for gold, it'll be perfectly normal to experience one or two years of countertrend," says Murenbeeld, who argues in favour of a significant bullish trend in the gold market on the basis of the current monetary and fiscal reflation that is under way.
"It's reflation that's good for gold," he says.
Aldis says that the current global financial turmoil has resulted in the biggest rate of change in the valuation of the dollar in the past 15 years, which, he cautions, should not be seen as a sign of dollar strength, but rather as a sign of desperation.
He says that in those 15 years, the gold price has also experienced its biggest extremes, which has prompted investors to ensure that there is gold in their investment portfolios.
There are strong signals now that point to the advisability of gold being added to investment portfolios, even though Aldis warns that the gold price could fall lower in the short term.
But overall, he says, that the world is in a 20-year cycle that is driving up the price of commodities.
The dramatic current correction, Aldis says, is only delaying the cycle, but not destroying it.
Even though central banks are holding 3 600 t of gold in loose form, that is, not tied up in any agreement that precludes them from selling, Murenbeeld senses that the central banks will opt to hold on to that loose gold.
"Central bankers have got religion again. They've seen the mess that they got themselves into, and I don't think they're going to have quite as negative a view on gold as they have had in the past," he says.
A number of matrices still point to gold being cheap and, in a real sense, a precious metal has yet to reach its peak, he adds.
Aldis reports that money supply is up 9% in the world's seven wealthiest countries, and up 15% in the seven largest emerging economies. This means that the biggest economy in the world, the US economy, is increasing the money supply, and the most populated country in the world, China, is doing the same.
While the Great Depression lasted 43 months, Aldis calculates that all US depressions and recessions since 1945 have averaged only ten months, and the longest in that time continued for 18 months.
He contends that the current recession has been under way for the past 13 months, and says that, if history is any guidance, only five more months of recession may be left.
New US President Barack Obama will spend 21% of the $825-billion fiscal stimulus package - some $174-billion - on energy, transport and other improved infrastructure, says Aldis, who calculates that for every $1-billion spent on infrastructure, 35 000 jobs and $6,2-billion in economic activity will be generated. Overall, the amount allocated should create 6,1-million jobs.
Simultaneously, China will be spending $3,1-trillion over five years, nearly one-half of which - 45% - will go on infrastructure spending.
Aldis, who accuses the banks of "throwing pennies around as if they were manhole covers", says new bank lending in China was at a record level in December and that money will soon begin to flow between banks.
Murenbeeld says that most of the global fiscal stimulus involves the printing of money, and adds that "printing is good for gold".
"What's going to happen is that old-line central bankers are going to reinforce old-line investments, like Treasury bills and gold," Murenbeeld predicts.