Gold could double, but beware the big dips

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=107168&sn=Detail

The gold price could well double in nominal terms over the next three years says Global Resource Investments founder, Rick Rule, but the circumstances surrounding such a move could include extreme social unrest, and will definitely involve massive volatility.

"Yes the Chinese have revalued a little, but until the Chinese, as an example, were to revalue the Renminbi substantially and on an ongoing basis, none of the rest of the Asian economies can allow their currencies to strengthen against the dollar. Or they get frozen out of the US market and accessing the US market was their development strategy," he says.

As a consequence of those two things, he says, the gold price relative to the prices of other mediums of exchange will do quite well in the next five years.

But, while it is likely to move broadly higher, it will not be in a straight line. As an example he says, if one looks back to the bull market of the 1970s, "when gold ran in US Dollar terms from I believe it was $35/oz to a high of $850/oz - along comes 1975 in the middle of that run and gold fell by half. People don't remember that but gold did run from $35 to some number like $210 or $215 and it fell from that number to about $110."

"Paradoxically, people who were right about the secular move in gold - many of them got stopped out by a cyclical decline and actually went bankrupt, despite the fact that they had the right long term trade and there's plenty of opportunity for gold to fall from the $1200/oz level to the $800/oz or $850/oz level on its way to higher highs."