Last summer I drew attention to the horrific bear market in gold and gold mining stocks suggesting, “it’s time to get greedy in the gold market.” Since then, gold has found its footing and, so far this year, has been the best performing asset class in the world.
Gold has now risen well above its 200-day moving average and the 50-day recently crossed above that average, as well. Based on any variety of trend-following measures, it seems the bear market is now over and a new bull market has begun. The question then becomes, ‘how far will this bull market carry?’
On Tuesday, Jeff Gundlach suggested a near-term price target of $1,400, roughly 12% higher than the current price. On the same day, however, one of the most respected experts in the mining industry shared a far more bullish long-term price target.
Pierre Lassonde told BNN one indicator he values is the ratio between the gold price and the Dow Jones Industrial Average. In the past, after major bull markets in, “hard assets,” these two have achieved parity. If stock prices were to simply remain where they are that analysis would yield a price target of $17,000 for the gold price. Lassonde suggests that it may be more conservative to look for a 0.5 ratio (gold-to-Dow), yielding a price target of roughly $8,000.
I don’t know if he’s right but he certainly has more experience with these long-term cycles in precious metals, along with a terrific track record to boot, than anyone else I can think of. And, as he says, it’s hard to imagine a more bullish catalyst for gold than the rapid growth of NIRP around the world.
