Here’s some important news for gold enthusiasts watching the current bull market; there are those who believe that it’s reasonably possible that the spot price of gold could soon top $5,000 an ounce.
“The potential level of a new peak can be estimated in several ways,” reports Reuters. “Based on consumer price inflation, the $875 per ounce high seen in 1980 is equivalent to around $2,400 today, almost twice the current gold price.” The same Reuters story further explains, “The world’s economic output has increased about six-fold since 1980. Scale up the peak 30 years ago by that multiple, and the gold price could top out at around $5,300.”
Another factor that can contribute to the increase in the price of gold is supply and demand. Right now, in Europe, the demand is extremely strong. The Austrian Mint has reported selling more gold in the two weeks following April 26 than it did in the entire first quarter of 2010 because of soaring demand in Europe. According to Kerry Tattersall, the Austrian Mint’s marketing director, “The mint sold 243,500 ounces of gold in coins and bars in that period, compared to 205,000 ounces in the entire first three months of the year.”
To put this kind of growth into proper perspective, this is a 663.85% increase in daily sales demand over the past two weeks compared to the average daily demand for the first quarter. “The mint has started working in three shifts again, minting coins and bars around the clock to keep pace with demand,” Tattersall said. “Currently we don’t have anything in stock. We sell our entire daily production immediately.” Even with this increased production, it is difficult to determine the exact level of current demand since we have not seen the excess inventory threshold. With the continued controversy of the bailout for Greece, Spain and Portugal, combined with mixed results in the U.S. markets, it seems that the gold bull may continue to run up new highs in the future. So whether the spot price of gold climbs moderately or exceeds the $5,000 mark, only time will tell. However, the general consensus of a number of analysts seems to be that gold will continue to go up for the foreseeable future because it is so effective at protecting the assets of hard-working individuals.
Disclaimer: The American Precious Metals Exchange, Inc. (APMEX) is not a registered investment advisor. This information is not a solicitation to buy or sell any precious metal products. Readers are advised that the material contained herein should be used solely for informational purposes and that they should contact their investment advisor to help them determine the proper course of action suited to their particular situation.