Jay Taylor On Gold
Jay Taylor
How high is gold heading in this gold bull market? My friend and Boston
based money manager Antony Herrey forwarded a chart of the inflation
adjusted gold price using not the government's own CPI statistics, but
rather the much more accurate inflation numbers compiled by economist John Williams. John's work demonstrates that the real CPI in the U.S. if it were recorded in the same manner as it was recoded before the Clinton
Administration, would be over 10%, not the 2.7% the government tells us it
is. By the way, you can read our interview with economist John Williams in
the July 2007 issue of J Taylor's Gold & Technology Stocks newsletter,
which is scheduled to go to press on July 16.
Given actual rather than the governments inflation figure, how high does
the price of gold need to rise for it to equal 1979-80 highs? According to
the chart sent to me by Mr. Herrey, gold would need to rise to $5,000 to
equate the purchasing power of gold that hit a high of $850 in January of
1980.
I have not personally run these numbers for my own subscribers yet, but I
plan to do so in the near future. However, I do have a chart using the
governments grossly understated inflation numbers. Even when using
"official" numbers from our Labor Department, gold would need to rise to
$1,459.63 for its purchasing power to equate to the average monthly gold
price at its peak in 1979.
John Hathaway Extremely Bullish on Gold
This past Wednesday, I attended a going away party for Ian MacDonald a
well-known and highly regarded gold bullion trader. Also attending was John
Hathaway, the manager of the Tocqueville Gold Fund. John has gone on record saying for several years now that before this bull market in gold is over, the yellow metal will be quoted in four digits rather than three. We are
not far away from $1,000 but judging by John's comments this past week, I
have to think he may ultimately be looking for a gold price well above
$1,459.63. Perhaps like $5,000 an ounce? We don't want to put words in
John's mouth, but he has agreed to an interview in the near future at which
time we will ask him.
Mr. Hathaway noted there is complete complacency in the market for gold
investments. He stated that even when his fund was posting 40+% gains, the
Tocqueville fund was not drawing in net new investments. More recently when
his fund has been gaining in the 8% to 9% range, the Tocqueville Gold Fund
has been experiencing net redemptions. John sees this tepid desire for gold
as being extremely bullish. In fact, in observing Mr. Hathaway for several
years, I have never seen him more bullish than he is now exactly because
Wall Street is disinterested at a time when the fundamentals have seldom
been more bullish for gold and more bearish for the dollar.
July 14, 2007
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
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