CPM Group Market Commentary : Gold Realism

CPM Group

Commodities Research

“49 Reasons All In A Line. All of them good ones. All of them lies.” Stephen Stills.

Last week a gold market participant provided us a collection of 10 gold price forecasts. The list ranges from $3,000 all the way to $10,000:

$5,000 to $10,000 / $5,300… $5,700… $3,100 / $6,221 … $10,000 / $3000 … $4000 / $6,000 / $5,000 and $10,000 / $5,000 / $5,000 / $5,000 / $10,000

You get the picture…. but these folks are not liars.

They simply are believers who either do not know or choose to ignore basic principles and realities of finance, monetary mechanics, politics, economics, or history. They also misjudge gold supply, fabrication demand, investment demand, central bank gold policies, above ground refined bullion and coin inventories, and gold supply and demand price and income elasticity.

We will not bother you with details, other than to point out that these gold bulls have been predicting since at least the 1970s that economic and financial excesses would lead to a global financial collapse and gold prices rising to $5,000, $10,000… whatever. They have been wrong on their economic outlook and their gold price projections for nearly half a century. At what point does one say to oneself, “Maybe I should stop listening to people who have been wrong for 30, 40, 50 years?”

John Maynard Keynes made at least two famous comments that are relevant here…

“In the long run we are all dead.”

“When the facts change, I change my mind. What do you do, Sir?”

The real economic and gold market research in our view should be a bit more realistic.

CPM expect gold prices to rise, but we are looking at $1,920 in the next three months, peaking around $2,300 during the years 2023-2025 (on an annual nominal average) before falling back quickly. That is what gold and other asset prices do: they rise and they fall. Gold prices declined after their increases in 1967-1969, 1974, 1979-1980, 1986-1987, 1992-1996 and 2000-2011.

We understand the gold market constraints to future prices: why they do not stay at peaks.  That is the reason why we base price projections on a realistic understanding of the monetary and financial system, including its risks but also its resiliency… The analysts at CPM have been projecting period bouts of financial and economic recessions, failures, and problems since 1978, but have never assured our clients that the global financial system was about to collapse entirely. That is not the way the world works, for many reasons.

Please keep an eye out for our regular Trade Recommendations published in the Goldex blog.

 

CPM Group’s Three-Month Gold Price Projections
Precious Metals Advisory, 9 July 2020
Historical performance & Strategies
Copyright CPM Group 2020. Not for reproduction or retransmission without written consent of CPM Group. Market Commentaries are published irregularly by CPM Group as market conditions dictate, and are distributed via e-mail. The views expressed within are solely those of CPM Group. Such information has not been verified, nor does CPM make any representation as to its accuracy or completeness. Any statements non-factual in nature constitute only current opinions, which are subject to change. While every effort has been made to ensure that the accuracy of the material contained in the reports is correct, CPM Group cannot be held liable for errors or omissions. CPM Group is not soliciting any action based on it. The information contained here should not be relied on as a specific investment or market timing advice. At times the principals and associates of CPM Group may have long or short positions in some of the markets mentioned here.