How High Can Gold Go?

If you take the latest TIPs yield curve and plug it into my world-famous gold price model, you can get a look at the possible future price of gold. According to the latest numbers, gold will break $2,000 an ounce next year and $2,500 in 2013.

There are some important caveats. One is that my model only looks at the relative price of gold to current real interest rates. Those could be far too low, and with the 10-year TIPs at 0%, I think that’s likely true. Still, this shows gold having an impressive run.

Also, notice how the velocity of gold’s rise starts to slow down around 2020. Once real rates start to climb higher — whenever that will be — it will hurt the price of gold. The TIPs market doesn’t see that happening for some time, but it will come.

That’s the key thing about gold: its price is driven by political considerations. Higher real rates will spell the end of the gold rally.

Posted by on August 17th, 2011 at 3:33 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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