Sprott Money Contact Form

Thank you for contacting Sprott Money.  We will respond to you within 1 business day.



The Sprott Money Team

Sprott Money Ltd.
111 Queen St. East
Suite 501
Toronto, Ontario M5C 1S2

[t] 1.888.861.0775
[f] 416.861.9855

Administrative office only - no walk-in sales.


Please Try Again After Some Time...
Please enter valid captcha
Loading Image

Toll Free: 1-888-861-0775; Local: 416-861-0775

Swipe to the left

Evaluating The “Rally”: How Long To Get To $10,000/oz? - Jeff Nielson

Evaluating The “Rally”: How Long To Get To $10,000/oz? - Jeff Nielson
By Jeff Nielson 1 years ago 5464 Views 9 comments

September 14, 2016

There’s a “rally” in the gold market right now, and (to a lesser extent) in silver. We’re told this by the mainstream media – in between its salvos of gold-bashing. Sadly, we have also seen this parroted by numerous Alternative Media commentators. So let’s examine this “rally” yet again.

The rally started almost precisely on the first day of the year (nothing suspicious about that). In the 8 ½ months since then, the price of gold has risen by roughly $250, or a little below $30/month. For convenience, let’s say that the price has been advancing by about $1 per day.

For the sake of argument, let’s pretend that this is a real rally, and see how long it would take to reach any rational price targets. Let’s start with a big target: a fair and rational price for gold – today . A previous commentary pegged that fair price at $10,000/oz, calculated in relation to a fair price for silver, today: $1,000/oz. The 10:1 price ratio between the two metals (rather than the historic ratio of 15:1) is based upon the fact that most of the world’s silver stockpiles have been literally consumed, thus the supply ratio between gold and silver has not been this low in at least 500 years.

How long would it take the price of gold to get to $10,000/oz, with the price advancing by $1/day? With the price differential between the current price ($1325/oz US) and the fair price for gold a little less than $8,700, it would take a little less than 8,700 days for the market to reach that price level. The “rally” in the gold market would have to continue for roughly 25 years, just for the price of gold to reach a level which it should already be at – today.

Some readers will find this metric unconvincing. They have been deluged with mainstream media propaganda for so long that they cannot even conceive of a fair price for gold. So let’s move to a lower target.

Gold is a monetary metal . As such its price must precisely reflect changes in the monetary base. Between 2009 and 2014; the Federal Reserve quintupled the U.S. monetary base – the infamous Bernanke Helicopter Drop . At the time the Helicopter Drop began, the price of gold was at roughly $800/oz. Thus if we ignore all of the other positive fundamentals of the gold market, and we pretend that the price of gold at the end of 2008 ($800/oz) was a fair price, the price of gold had to rise to at least $4,000/oz, by the end of 2014.

Of course the Federal Reserve’s conjuring of mountains of funny-money is only one of many positive fundamentals for the gold market. The price of $800/oz at the end of 2008 was not a fair price. It was absurdly low, due to the serial price-manipulation of which all informed readers are very familiar. Thus a price for gold of $4,000/oz – at the end of 2014 – would also have been absurdly low.

How long would it take for the price of gold to reach this low, 2014 price-target, at the pathetic pace of today’s Fake Rally ? We’re now dealing with a price differential of a little less than $2,700, meaning a little less than 2,700 days to reach a somewhat fair price for gold – in 2014. Eight more years. It would take nearly eight more years of this pseudo-rally for the price of gold to reach an absurdly low price target, which it should have already hit, in 2014.

This would make the total length of this hypothetical rally a little over 8 ½ years, with the price advancing from a sub-$1,100/oz price up to $4,000 – a total move of roughly 370%. Now let’s compare this to the ten-year bull market from 2001 to 2011. During that period, the price of gold moved from roughly $300/oz to nearly $2,000/oz. That’s a move of approximately 670%, and this significant advance in price came despite the fact that the manipulation of the price of gold was, in some respects, more extreme during those years than what we see today.

Back then, Western central banks were still pounding the market with their official gold-dumping: 500 tonnes per year. But Western central banks have long since run out of gold to dump, and now central banks in other parts of the world having been buying gold – at a pace not seen in more than 30 years. The 500 tonnes per year of gold-dumping has nearly been reversed , a positive differential of nearly 1,000 tonnes per year in supply/demand fundamentals.

Along with that major shift in supply/demand fundamentals, we have had the emergence of China as another mammoth gold market – on par with India – and another gigantic source of demand: in excess of 1,000 tonnes per year. Those are just the largest shifts in supply/demand fundamentals, and have resulted in a large, structural supply-deficit emerging in the gold market.

As already noted, we have also seen Western central banks since embark upon a new, unprecedented era of money-printing insanity , another price-driver which did not even exist for most of the 2001 – 11 bull-run. Thus, for numerous reasons, the price of gold would have to rise at a much, much faster pace during any legitimate rally today than it did during the previous 10-year bull market. Instead, we see prices advancing at little more than half that pace. Impossible.

Still, even this analysis, with an extremely modest price target, will be too great a stretch for the minds of some readers. These readers have been brainwashed with anti-gold propaganda for so many years that they can barely even conceive the price of gold reaching a new, nominal high. Note that in real dollars, the price of gold would have to rise to well over $3,000/oz – just to equal the 1980-high in the price of gold. But let’s stick with phony, nominal numbers.

How long would it take the price of gold to merely equal the 2011 nominal high of just below $2,000/oz? It would take nearly two more years. This would make it a total “rally” of more than 3 ½ years to take gold from its sub-$1,100 price level at the end of 2015 to get back to a previous (and ridiculously low) nominal high.

Understand the context here. With precious metals having been subjected to decades of the most-extreme price manipulation in the history of commodity markets, this translates into precious metals having the “most bullish” fundamentals of any commodity market in the history of human commerce. The gold market should be “stronger” today than other commodity market in the history of human commerce – except for the silver market .

It doesn’t take such markets 3 ½ years of “rallying” just to reach a previous, nominal high. Three-and-a-half months would be more than a sufficient time horizon. If there was even the faintest hint of legitimacy to this Fake Rally, the price of gold would not have been advancing at a laughable rate of $1/day. It would be leaping higher at an average rate of between $10 - $20 per day, if not much more than that.

The fact that rational, even intelligent people could consider this managed advance in the price of gold to be a “rally” is a credit to the success of the propaganda from the Corporate media and the bankers themselves. When we see the propagandists coming up with their own price-targets for gold, what sort of numbers are we seeing?

Are we seeing predictions of $10,000/oz? Are we seeing predictions of $4,000/oz? Are we even seeing predictions of a paltry advance to $2,000/oz? No. The most enthusiastic “gold bulls” among the bankers and media talking-heads are predicting that the price of gold could – some day – reach $1,500/oz.

This is one of the key elements in anti-gold and anti-silver propaganda: never presenting even quasi-realistic numbers as price-targets for gold and silver. The propagandists pretend that the maximum, future price for gold (and silver) is only some microscopic fraction of where the price should be already, today. To be precise, the propaganda machine almost never publishes any quasi-realistic numbers for the price of gold.

A recent commentary focused upon a rare lapse in the propaganda strategy: a mainstream talking-head asking the question :

Why Is Gold Not At $2,000/oz?

Why has the price of gold not already equaled (and surpassed) the ridiculous, nominal, previous high that we saw back in 2011? As was explained in that commentary, the propagandists have no answer to this question. The “reasons” which were given were analyzed, one by one, as being nothing but infantile nonsense. There is no reason why the price of gold has not already passed the pathetic price threshold of $2,000/oz (USD).

Yet, today, we are 8 ½ months into a rally where we’re told that, if everything goes well, the price of gold might eventually rise to $1,500/oz. A fantasy world. Readers know this world as the Wonderland Matrix . Supply/demand fundamentals don’t count with respect to precious metals. Monetary fundamentals don’t count. What does count?

Again we descend into a realm of utter nonsense. According to the bankers and their media prostitutes, whether or not the price of gold makes it to the ‘elevated’ level of $1,500/oz is totally dependent on whether or not the Federal Reserve raises its benchmark interest rate from 0.25% to 0.50%. Insanity!

Ultra-low interest rates are supposedly rocket fuel for precious metals, based upon the bankers’ own propaganda. Supposedly, all the years where the price of gold was languishing at absurd levels, this was because “gold pays no interest”, while the bankers’ fraudulent paper currencies did. Now these fraudulent paper currencies pay no interest, indeed, our criminalized interest rates are now moving into negative numbers – and still we see the price of gold only creeping higher at the rate of $1/day.

There is no rally in precious metals. There never was. Instead, we have the bankers engaged in a (modest) upward price-fixing operation, setting gold and silver up for a severe take-down, as a part of the banking Crime Syndicate’s strategy for “the Next Crash” .

It is after this manufactured Crash that we will see a real rally in precious metals, just as we had a real (but abbreviated) rally after the Crash of ’08. Note the differences in parameters. Precious metals prices are even more suppressed today than at the end of 2008. Precious metals fundamentals today are much, much more bullish than at the end of 2008. The economic carnage which will result from the Next Crash must be much more severe than the Crash of ’08 – creating much more “safe haven” demand. A real rally in precious metals would (will) be the Mother of All Rallies.

Why do so many people consider the current, tiny upward movement in the price of gold to be a “rally”? Because after years and years of hard-core brainwashing, these people no longer even know what a real rally would look like.

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.

The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

David Watters 1 years ago at 2:30 AM
Hello to you Jeff,
Thank you for pinpointing out that the current gold/silver market action is not a raleigh. If I could allow myself to make a few bullet points on what you write because I think likewise but my language is somewhat different.
1. Central Banks don't hate gold/silver, they hate you & I having gold/silver. And they may have already set an approximated price for countries "Balance-of-Payments" & Trade. This because our debt based monetary system has stopped functioning, this because we have reached "LIMITS to GROWTH". Growth is over. This is not very well understood and not part of the "Conversation". Today we are at a plateaux, eight-&-a-half years plus you inadvertently point out. The other side we will all begin our decent. Economies will contract. There will be recoveries and recessions but the overall trend will be "Contraction". Fiat Currency will contract and gold or silver may be once again used as money. I am of the opinion this is work-in-progress. With regard to currencies they may move the decimal point a number of places to the left, and not change the numbers themselves. The Asian currencies at present are all hovering around the "number 6", while the wild western currencies are hovering around the "number 1" I say watch this space.
2. Negative Interest Rates; All money is debt. If all debt was paid back by 'You & I,' Governments, Corporations (& Sprott Money -joke) there would be no money in existence. Remember only what is referred to as the principal is ever created in the money supply, so where is the interest if all the principle is paid back, "It's nowhere." This is why people and companies sometimes default, so called competition, chasing money that's not even out there. We could argue that negative interest rates is the first time for interest to be actually created and paid back. In their own Ledgers I might add, "Double Entry Accounting" Positive interest on the Debit-side, negative interest on the credit-side or visa-versa.
3. Confiscation; We could argue precious metals have already being confiscated by the confiscation of information like the information You your good Self do give. The "Mainstream Media" has done a good job on the general public at information confiscation and we have all the "Jim Rickards & Co" to confiscate information from actual buyers. I wonder if his recent books were weighed in troy ounces, which one do we think would be the lightest.
3. "Consideration" A wonderful piece of writing you done. I brought Consideration up with Craig Hemke sometime back but unlike you I'm not qualified in law so I leave stuff like that to others. Just to finish on a lighter note, I foolishly addressed Craig Hemke as "Turd Ferguson" thus I assume your name is Jeff Nielson.

With Kind Regards,
David Watters
Jeff Nielson 1 years ago at 10:16 AM
Indeed, David, I AM Jeff Nielson (lol).

I spend most of my time writing about economics, so I'm very familiar with the dynamics to which you refer. In fact I just finished writing two pieces for Sprott Money on what "negative interest rates" really represent.

Yes, saying that the "bankers hate you and I holding gold and silver" is the more correct language. If we hold the bankers' paper, we are victims and slaves. If we hold our wealth in gold and silver we are free men (women).
John Fikre 1 years ago at 2:23 PM
Hi David, I cannot understand why the market participants continue to subject themselves to losses when the bullion banks dump naked shorts on the Comex. Even if they do not believe that gold will ever get to say a paultry $2000/oz, why do they engage in stop loss selling, which is fundamental to the success of the bullion banks' manipulation. If the market participants simply were tp hold on to their contracts, buy the contracts that the bullion banks dump and then insist on physical delivery at contract expiration, wouldn't the whole game be up? How can it be that all these sophisticated market participants continue to be tricked by the manipulation and sell only to see the bullion banks cover their naked shorts and make a profit (off the backs of these stampede sellers), all the while suppressing the gold price?
John Fikre 1 years ago at 2:44 PM
Meant to say "Hi Jeff"...
Jeff Nielson 1 years ago at 4:13 PM
John, this is a really good point.

Yes, the Bullion Banks (meaning the One Bank) "play" these traders like the ultimate Chumps that they are. NO ONE should trade in the gold and silver "markets" -- because they're not markets. They're computerized price-rigging operations which have been allowed to hijack our market infrastructure.

This is how the Game is played. MOST of the time, the Bullion Banks have their computer algorithm mimic so-called "technical analysis", particularly any time they get the trend pointing lower. This is what lures the Chumps into the Game: they THINK they are dealing with a legitimate market.

But (of course) the banksters regularly violate the technical analysis with their price-rigging -- especially when the trend is pointing up. The result is that any/all long traders are continually getting caught with their pants down.

Anyone with half a brain who WATCHED the price action over any length of time would see this, and either conclude that the Game was rigged, or (at the least) that this "market" was simply too unpredictable. But (as P.T. Barnum said) there's a sucker born every minute, and they all seem to end up (eventually) trading long in precious metals markets.

Understand that there is no way to properly place "stops" in this pseudo-market. Place tight stops, and you get knocked out of your trade so often (for a loss) that you burn through all your capital. Place loose stops and you STILL get stopped-out -- because the Bullion Banks know where the stops are, and put as much downward pressure on the market as necessary to get a cascading effect.

The only way to "trade" these pseudo-markets is long-and-strong, i.e. no stops. Of course this means you can't use margin, which is why the traders will never play the Game this way. They don't have the patience, and they all want to use margin.

Of course if you're not going to have stops, and you're not going to use margin, you're no longer trading -- you're investing. In which case, why go to the Crooked Comex in the first place? You just buy your bullion direct from a reputable dealer, and leave the Comex to the Chumps.
Richard 1 years ago at 9:32 AM
I may have misunderstood, but if you take % gain from January 2016 rather than absolute gain and then extrapolate that out to $8,000 etc. you get a very different timescale. I think that central banks constantly mis-represent - it is important that commentators remain balanced to counteract that.
Jeff Nielson 1 years ago at 10:36 AM
Richard, talking about the price move in percentage terms is only relevant if the starting price is a RATIONAL NUMBER. At the end of 2015; precious metals had been subjected to five years of relentless, downward manipulation. The prices weren't an indication of the value of these metals. Rather, they were a testament to banker crime. The only relevant metric for discussing prices is in terms of their absolute rise, not percentage terms.
John Fikre 1 years ago at 4:11 PM
Yes, but I suppose I get back to my main concern: if the Comex is structurally rigged to suppress the gold price, then the bullion banks (as agents for the central banks) will continue to prevail and what gives any long investor confidence that we will ever see any true price discovery? It sounds like their manipulation is bullet proof if there are no true long investors buying contracts on the Comex, which sadly is the market where the gold price is set.
Jeff Nielson 1 years ago at 9:21 AM
Yes, John, precious metals are "structurally" rigged -- but it's an unstable/unsustainable structure. Even if they don't consume one ounce of their dwindling reserves in their manipulation games (highly unlikely) there is a HUGE supply deficit in the markets.

This is part of the reason the West has been destroying/usurping other nations around the world: to steal their gold reserves, and bolster the banksters' dwindling inventories: Greece, Iraq, Libya, Ukraine -- all looted of their gold.

There is nothing at all "bullet-proof" about this. It only seems this way because we have huge stockpiles of gold on the planet, and (at one point) the banking Crime Syndicate controlled most of it. Not any more.

Their Game ends when the last ounce of gold (or silver) is taken from their near-empty warehouses. That day could be TOMORROW. One thing we know with certainty is that the banksters aren't going to telegraph their own default.

Back to top