A Long Way To Go
by David Tanner
I always enjoy berating those I encounter who are guilty of "rear-view mirror" investing. An example of "rear-view" investing is when someone says "I don't want to buy gold now because it is too high." My response is always "too high compared to what? Too high compared to where the price was ten years ago (rear-view), or too high compared to where it will be ten years from now (full windshield view)?"

So having said that, I point out that this post will be based on a "rear-view" of the gold market, so just take it for what it's worth. The rear-view can be helpful, but it should never trump the "full windshield view." Having dispensed with this caveat, I offer the following observation.

The following chart from Casey Research shows how much of the global financial assets were invested in gold during the last gold bull market, and compares that percentage to today's figures.



As you can see, based on the "rear-view" it looks like we have a long way to go in this gold bull market. In fact, it appears that we are just getting started. Were we to simply equal the 1980 peak, gold should attain the price of $5,200 an ounce.

However, the future is always "similar" to the past, but never exactly the same. I think this is especially true in this current gold bull market. The forces driving gold higher today are exponentially greater than what we had in the late 70s.

The bull market of the late 70s was mostly caused by a dollar problem (This is a gross oversimplification of that time, I know!). Today however, we have a GLOBAL currency problem. ALL currencies are under attack!

Therefore, when we take a look at the rear-view mirror, and combine it with what we see out of the front windshield (which is a far more important indicator) we would have to come to the conclusion that $5,000 gold is most probably a gross underestimation of how far this bull market really has to go.