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Gold going to $10,000 an ounce?!

Sunday, November 14th, 2010

Last year this time, Aaron wrote about gold going to $2,000 an ounce. Gold is trading at $1,368 per ounce now. A serious gold bull named Shayne McGuire has a bold prediction for gold — it would reach $10,000 an ounce! Shayne McGuire runs a $330 million gold portfolio at the Teacher Retirement System of Texas. He made his forecast in the recently released book, “Hard Money”.

McGuire’s logic is that $10,000 gold is possible if enough other pension funds and big investors jump-start buying and move as little as 1% of total global stocks and bonds holdings into the metal. Such a migration into gold would equal enough demand to push prices up tenfold from their current level, he calculates. To me, it sounds crazy. It’s not really percentage of total global stocks and bonds that matter. What matters is the percentage of total asset in each individual fund. There are few mutual funds that invest only in gold. Most of the mutual funds or pension funds invest only 0.5% to 5% of their total asset in gold. Unless there is solid and very compelling reason to buy more gold, fund managers will not increase the current percentage allocation for gold.

There is another gold bull, prominent hedge-fund manager John Paulson, has predicted gold could go to $4,000 an ounce by as early as 2013. Comparing to $10,000 an ounce, $4,000 an ounce seems realistic! Ok guys, just kidding. I don’t think the gold could go even to $4,000 an ounce. It might cross $2,000 an ounce if the current momentum continues. After some point, there would be limited amount of buyers which would naturally bring the price of gold down.

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