Finding Gold in the Mainstream

For the old gold believers, many opinions on where the gold price might go are currently in circulation, though let me say that we are not endorsing any of these big numbers.

Here’s something on price from Ian McAvity, a longtime and respected gold market watcher, in his latest Deliberations on World Markets newsletter: “Gold is about 50 percent above (its) 1980 peak, while total U.S. credit market debt has increased 12-fold and the S&P 500 is about 10X where it was in 1980… it would take a rush to $5,479 to replicate the 1980 peak (I repeat that is not a forecast, it’s a technical observation from an overlay of the cycle of the 1970s on the cycle from 2001) Simply put, any talk of a gold bubble is utter nonsense… While the markets toss the inflation/deflation debate back and forth, I believe the key driver of gold is monetary.”

And for an even bigger number, I turn to Barry Cooper at CIBC in Toronto. The chart above shows the relationship of the gold price and U.S. government debt. He says that if somehow a new gold standard were to be created, the gold price would have to be $46,000 per ounce if all U.S. government debt had to be backed by bullion. We don’t believe that a Bretton Woods II agreement is coming, but for those strict monetarists who support a return to the gold standard, this estimate provides one view on how it could impact gold.