I certainly agree 100% with everything said by Jim Sinclair. I believe gold will continue higher simply because the US has to keep devaluing their dollar because they have to keep printing dollars.
When gold hit 1500 and there was a lot of talk about a bubble, I sent the following simple comparison to a few colleagues and friends.
I have compared the rise of the price of gold since around 1980 when it settled down to average $400, to the rise of the value of real estate in Australia. In 1934 gold was fixed at $35, and in 1971 it was floated. Once it was free to move it fluctuated violently including a peak around $800, till it settled to average around $400 by 1980. So it seems the market decided around $400 was the right price in the early 80s.
For 25 years between 1978 and 2003, it averaged around $400, and then dipped to $250, before beginning the large climb to $1500 now in 2011. Thats a rise of just 3.75 times in 33 years. Thats not as extreme as the more recent rise from the low point of $250 to $1500 or a factor of 6 over 11 years, but I believe this more recent rapid rise was just a case of catch up from a very oversold low. As a comparison, median house prices in Melbourne were $44,000 in 1981 and $524,000 in 2010. Thats a rise of 12 times over the same period that gold has risen by just 3.76 times. Even if house prices manage to fall 30% to $370,000, thats still up by a factor of 8.4 times and if they fell 50%, they would still be up by 6 times compared to 3.75 times for gold. Perhaps gold still needs to rise by at least another 100% to catch up further? That doesnt rule out corrections though. House prices have risen much faster than CPI. In 1970, only 37% of a persons wage went to the mortgage. Since 2002 its been over 85%. The recent rapid rise in gold over the last 11 years looks much more like a case up catch up rather than a bubble and I see no reason for it to stop any time soon.
KGL Price at posting:
98.0¢ Sentiment: Buy Disclosure: Held
