Guest Post: How High Will Gold Go in 2011?

Tyler Durden's picture

Since CNBC has been issuing a non-stop barrage of its own version of reality vis-a-vis gold and other precious metals, it may be time for some counterpoint. For all those who believe that the drop in gold from levels which were virtually all time highs on Monday, is the equivalent of the apocalypse, we urge that you sell: volatility will be a key part of the game, and it may be prudent for timid elements to run into the levered safety of 5x beta stocks, trading at 100x forward P/E multiples, which are guaranteed to never go down. It will also likely shake out the weak hands, and certainly provide some cheaper entry points (something which we are confident Cramer's endless prattling on gold will do on its own sooner or later). That said, here are some amusing observations by Jeff Clark of Casey Research on how high gold could go in 2011. Keep in mind that just as all the program content on CNBC, this is nothing but pure abject speculation. In a world of central planning, none can predict the future with any does of certainty.

By Jeff Clark, Casey Research

How High Will Gold Go in 2011?

After stellar years for both gold and silver, what prices will
precious metals hit in 2011? Here's an analysis based strictly on their
price behavior in the current bull market.

First, take a look at the annual percentage gains that gold has registered since 2001 (based on London PM Fix closings):

Excluding 2001, the average gain is 20.4%. Tossing out the additional weak years of '04 and '08, the average advance is 24.8%.

So we can make some projections based on what it's done over the
past 10 years. From the 12-31-10 closing price of $1,421.60, if gold

  • The average rise this decade, the price would hit $1,711.60
  • The average rise excluding the three weak years = $1,774.15
  • Last year's gain = $1,858.03
  • The largest advance to date (2007) = $1,875.09

But what if global economic circumstances continue to deteriorate? What
if worldwide price inflation kicks in? And what if government efforts
at currency debasement get more abusive? If Doug Casey is right, a
mania in all things gold lies ahead – what if that begins in 2011?
Here's what price levels could be reached based on the following
percentage gains.

  • 35% = $1,919.16
  • 40% = $1,990.24
  • 45% = $2,061.32
  • 50% = $2,132.40
  • 1979's gain of 125.7% = $3,208.55

It thus seems reasonable to expect gold to surpass $1,800 this year, as
well as reach a potentially higher level since the factors pushing on
the price could become more pronounced.

Here's a look at silver. 


As you can see, silver had its biggest advance in 2010. The average
of the decade, again excluding 2001, was 27.5%. And also tossing out
the '08 decline, the average gain is 34.3%. So, from the 12-31-10
closing price of $30.91, if silver matched...

  • The average rise this decade, the price would hit $39.41
  • The average gain excluding 2008 = $41.51
  • Last year's advance = $56.22
  • The 1979 gain of 267.5% = $113.59

So, $50 silver seems perfectly attainable this year. And that's without monetary conditions worsening.

It's titillating to ponder these advances for gold and silver,
especially when you consider we might be getting close to the mania.
And if we are, that should do wonderful things to our gold and silver
stocks, too.

I would add one caution: the odds are high that there will be a
significant correction before gold begins its march to these price
levels. In every year but two ('02 and '06), gold fell below its
prior-year close before heading higher. And here's something to watch
for: in every year but one ('08), those lows occurred by May.

In other words, a buying opportunity may be dead ahead. And if you buy
on the next correction, your gains on the year could be higher than the
annual advance.

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Freddie's picture

Where is Blythe and The JP Morgue?  My silver is going down with my gold.  Should I "buy the fucking dip?"

Spalding_Smailes's picture

Can you understand ? 

Sell 5% of your gold and buy SPRD,ARM,MIPS,NVDA( nice charts ). You will be happy mon'

hambone's picture

Funny, reading a trite article in MW and they had a chart of Dow from 1980 through today showing we were back at 2000 peak.  It also happens to be the exact formation of a massive head and shoulders pattern (seriously, look it up in investopedia or is like we are nonchanalantly living w/ Mt. Vesuvius in our backyard.

Look at it, stare at it.  Check the downward sloping neckline.  So fricking obvious.  The tidal wave is more than the Bernank can overcome.

Spalding_Smailes's picture

I'm not trading S&P. Look at the return on those stocks in the last year & look into the exploding market they service. 

Look at the monster head and shoulders on a ten year gold chart. When gold hits 1,200 I will buy a few miners ...


... "Nvidia announced that it is indeed working on a CPU and that the chip is based on the ARM RISC architecture that's wickedly popular in smartphones and tablets. In other words, it's not a low-powered x64 chip.".....

hambone's picture

You were a lot funnier when we wondered if you'd pick your nose and eat it!

Buy what you want but just make sure you have what you really need just in case things don't turn out well (ie, food, water, shelter, friends).  And no, if things go poorly, gold will likely only be of limited use as well.

I think what I'm saying is theres a high likelihood the game will be changed...all new rules, sorta like changing from Monopoly to Risk and your monopoly money won't mean anything in the new game.  Seems we're all trying to figure out what that transferable currency will be so we can make the jump.  Could be stocks, bonds, gold, guns and ammo, who knows.  Good luck to all of us.

Hephasteus's picture

Oh noes. Nvidia is fucked. You want to know why they are fucked. Because they have to pulled out the magic Acorn of antioc. ACORN@tm

Industry Computer hardware Fate Bought by Morgan Stanley Founded December, 1978 Founder(s) Hermann Hauser
Chris Curry Defunct November, 2000
barkingbill's picture

there is no head and shoulders on a ten year gold chart. lol. who are you kidding? it is just going right on up...but hey if semiconductors is your thing...

Hephasteus's picture

There's a cup and a head and shoulders and a rorshak test in there. This brilliant wall street guy told me so.

A Nanny Moose's picture

this Wall St. guy, didn't by chance have an alter-ego named Underdog, did he?

akak's picture

there is no head and shoulders on a ten year gold chart.

I think Balding_Snails got confused while reminiscing about having rubbed shoulders with Bernanke while dissing gold, and having then given him head.

Arius's picture

save your money for FACEBOOK...GS is in need of suckers...

Dr. Sandi's picture


You are a god. And having your blog

available when my silver is getting tarnished makes the day a little easier to face.

My biggest problem right now is that the dip is here and I have no liquid assets to pour into silver. They're already there.

And the millionaire who owes me the paper stuff that would allow me to buy another hundred pounds or so of the silver is suddenly broke.

So I'm going to do a Brian Wilson and just go back to bed for a week or so.

ZakuKommander's picture

Take 2 aspirin and call me in the morning.

Janice's picture

Yes, just buy the fucking dip.

bigdumbnugly's picture

all i read here is to buy the f'ing dip.   so i do.  in fact, i've been doing just that for so long that i am getting into hot water around the house here.

she says its spoiling and that we'll never eat that many chips to use it all up.  and that we never go to the movies anymore because my money's tied up in dip.

yeah, thanks a lot all for the tip...

p.s.  party at my house.  byo beer and chips.  i got the rest.

Dr. Sandi's picture

Switch to the Frito-Lay stuff. It has enough preservatives to keep you dippin' until plastic is considered a precious metal.

bigdumbnugly's picture

thanks, doc.  wait til she hears that!  lol.

Crisismode's picture

No, No, NO!

You have it COMPLETELY wrong!

You must Fuck the Buying Dip!

There, fixed it for you.

pamriallc's picture

Hedge-Fund Man Finds Inner Lion in Outer Space: Michael Lewis



To: The Loyal Investors of The Fund

From: The Manager


Like a lot of hedge-fund guys, I’ve recently endured what might be misconstrued as a nervous breakdown.


Before CNBC or the New York Times or some other rag grabs the story and distorts it, I want to tell you about it myself -- and explain not only my disappointing returns but also my prolonged absence. Just so you get it straight.


Anyone who runs several billion dollars of other people’s money, and one hundred million of his own, is likely to having moments of self-doubt. I don’t recall experiencing any myself, but I concede that others have.


My personal crisis was different: a single moment, earlier this year, when I doubted not myself, but the world we inhabit. If I was a different kind of guy or (God forbid) a chick, I might easily have gone all “Eat Pray Love” on you.  Had I succumbed to the feelings of that moment I might have vanished in a puff like Andrew Lahde to devote my remaining days on Earth to the smoking of what is no doubt some very fine weed, or run off like Stanley Druckenmiller to feed the poor and cure some lepers. Like Guy Hands, I could have gone into hiding on a Channel Island; or, like dozens of hedge-fund guys in the past year, I could have just folded, without offering you any explanation.


My crisis struck one morning early this year, as I stared at my Bloomberg screens. Nothing had happened and that was the scary thing. For no reason in particular I was overcome by this eerie conviction that markets would never again be free. They’d become traps, run by politicians and bureaucrats, designed to ensnare the superior man.


Jungle Law


What had happened, in a word, was socialism.


The law of the jungle, suspended since the fall of 2008, had been permanently revoked. Park rangers would forever more feed and protect all the animals, even the fat slow ones that deserved to die. In this new environment the apex predator --the lion with the gift for spotting the wounded antelope -- was doomed. My sixth sense for the kill was now irrelevant.

It goes without saying that, to a lion, feelings of doom are especially painful. To my credit, I resisted hiring a shrink, or rethinking my priorities, or searching for any more meaning in my life. Instead, I shot you that note, reminding you that all of you have the same two-year lock-up, then I cut a check to the Russian government for a seat on its new Soyuz TMA- 19 rocket.


Russian Shorting


For those of you who have never had the experience, getting launched into outer space by the Russians sounds weirder and more offbeat than it actually is.


It’s not expensive -- at least not in the context of my net worth -- or even complicated, unless they find out you’ve been shorting Russian stocks. Mainly, you show up wherever some Russian tells you to, and refrain from making unreasonable demands, or offering them too many of your own ideas how to improve their operation.


Anyway, orbit turned out to be the perfect place for a hedge-fund manager to reconsider his place in the universe.

Floating around the capsule providing financial advice to my fellow astronauts and getting to know some of the ladies on board, the disturbing turn of events back on Earth came into sharper focus.


Your constant demands that I explain my strategy to you; the systematic extermination of some truly badass hedge-fund guys; the rumors that Goldman Sachs might shut its prop-trading desk rather than simply evade the new laws; the drumbeat that Wall Street is no longer a land of opportunity; Craigslist shutting down its sex ads -- all news points in the same direction: big-time returns for me in the future.


Rising Lion Prices


The price of being a lion is rising; the weaker lions are slinking away from the jungle. The stronger lion, the lion who survives, will have the jungle to himself. Inside the space capsule I had an epiphany: I am that lion.


Clawing my way along the wall to the capsule’s latrine, I passed a window. For the first time I really looked at the planet we live on -- the planet on which I still think I can generate returns in excess of 18 percent per annum.


In that moment I realized how small it is. No bigger than my wallet, when I held it up to the window. A lot of people, including some of you, have described me as “larger than life,” but no one has ever called me “larger than Earth.” Yet in comparison, from that distance, I was huge.


Then it struck me: so long as I keep my distance from my planet, I will be able to keep myself in the proper perspective. So long as I remain able to visualize my relative size, it doesn’t matter if others seek to shrink me.


The socialists thought they could force me to violate my own nature. I’d found the way to stay true to myself.


Take Me Back


Thus reassured, I told the guys up front to cut the engines and get us back down on the ground, preferably somewhere near midtown Manhattan. I was itching to trade; poised for a few quick kills.


Alas, it took the better part of three months and some serious change to persuade the Russian government to ferry me back earlier than planned. When you are in space it’s sometimes hard to explain the value of your time. But in retrospect this was a lucky break, as it gave me the leisure to begin my memoir of the financial crisis, “Outer Space, Inner Lion.”

Rumor has it that those of you who have given up on me assume you have heard the last of me.


Trust me:  You haven’t.

CrazyCooter's picture

Having fun here ...

Assuming you are serious, its funny someone who clearly has a math background needs hookers in space to realize they are statistically insignificant in the universe.

Me and my imagination nailed that as a teen.

Hope you future has room for non-producers!


gmrpeabody's picture

And so..., your point is?

Bananamerican's picture

in the capsule, the peaceful capsule, the douchebag sleeps tonight.....

thegr8whorebabylon's picture

Thank you Michael Lewis.  The Big Short was one of the better reads of my life.  Still at it I see, pesky lion.  BTW, Mike Burry's gold and farmland, and prolly here with us right now.  :)))

jmw_hobbes's picture

As crazy as it sounds, I in fact nibbled the dip today and added 250 shares to my pot of PSLV.  Perhaps more correction to come and I will be foolish again and re-buy...

tao400's picture

That's what I am hoping to do. sold a bunch of gdxj, gdx, sil, slv. Waiting for them to go down below where i sold them. it is close now.

Flapjackmaka's picture

It's at the top the bubble will pop


Monkey Craig's picture

be wary of the shill "HamyWanger" too...note the spelling

Thomas's picture

I'm tearing up while I type.

thegr8whorebabylon's picture

hey Thomas, your year in review was something else, thanks!

tmosley's picture

Waiting for May is a danger game.  Play it only if you are satisfied with the PMs you have in hand right now.

Selling at this juncture is madness.  I do agree with the sentiment that the callow whiners should get out immediately. 

famousamos's picture

Concur on the danger of waiting for May, especially for Silver. I bought a couple more ASE rolls at 10am - classic morning takedown. Little here and there and the wife won't notice :)

Another factor here is the 60 day delay in position limits. A lot of people think this will impact JPM short position. I think they'll probably get a waiver and the long positions will be scrutinized instead (bastards). If not, we could see a huge silver spike in as little as two months (IMO). I'm keeping cash on the sidelines for a really good buying opportunity. If it never happens, I'm fine keeping the cash. I think silver will move before May due to position limits and QE3 talk, so the Silver takedown should be Jan/Feb.

CrazyCooter's picture

I had the same thoughts regarding position limits. I am not sure its realistic to expect fairness at this point in the game.


ShankyS's picture

May get a bit of extended pullback here IMO, but does it really matter? If you can find it, buy it. This is not the time to get greedy on price.1 to 2% here won't be significant where gold is headed.

TheGreatPonzi's picture

Gold and silver performed poorly in late 2008 because of deleveraging and deflation fears. At the time, governments and central banks had not shown their teeth. Now that it is obvious for everyone that deflation is definitely ruled out - except for a few idiots -, I can see no barrage for gold prices.

I remember having seen in early 2009 and early 2010 the old good arguments for gold (money printing, bailouts, dollar depreciation) on forums and blogs, refuted by the old good anti-gold people ("gold is in a bubble", " I predict the exact opposite", "gold bugs will be surprised by the violence of the crush", "deflation is the only plausible thing", etc.)

If we take the final toll, gold won, paper bugs lost.

How much in 2011? Except if every governmental and central bank support measure is brutally stopped and withdrawned (i.e. a deflationist fool's dream), a minimal 20% increase will happen.

txapela's picture

thank you for that.


any idiot that sells a PM while the Fed is staying that they're going to complete QE2 and there are good chances of continuing into QE3 should be sent to the gallows.


PMs are down because of direct market manipulation. The modus operandi of the crooker bankers is simple. They withhold all bids to buy as they tell would be purchasers to hold off as they will get their metal cheaper. Then they bombard with over 100,000 contracts that are totally un-backed and they trip some of the longs who have stop losses below the spot price. this trips other stop losses as the price goes lower until it reashes its nadir and the bankers slowly try to cover all their shorts. this is collusion, as all the bankers are told in advance when the raid is to be expected. Then they supple paper with no backing to gold or silver whatsoever. And our regulators just stand there and do absolutely nothing with this blatant manipulation.


So I must ask these question:

Are the same fundamentals which sent the price of PMs soaring still in place? Yes.

Need anything else to know that it'll keep going up? No.

Why? Because the fundamentals always beat the technicals in the long term. Always.


Also, don't buy any derivative (paper) based ETFs for your PM exposure. Don't be fucking stupid. The Over The Counter (OTC) Derivative Market is at $400/$600 trillion (forget the actual number, but really, who gives a fuck when it's that big of a number?)

Either hold physical metals in your house, or hold stock in a fund that isn't owned/operated/held by a bank. Fucking end of story. You've been warned, and as we say in spanish: people don't die after being warned of war. Meaning: duck and cover.

Crisismode's picture

Are you Harvey Organ?

If not, your 2nd Paragraph (PMs are down . . .) is a direct plagiarism from his website posting yesterday.

Which is it?

bigdumbnugly's picture

not sure,  tx didn't talk about smoke coming out of the comex windows or say anything about them staying up all night burning the midnight oil and scheming their next move.

but the rest was pure harvey.

Yardfarmer's picture

you outta give the proper attribution to Mr. Harvey Organ

CrazyCooter's picture

Please attrib to harvey's post, a chunk of your post was his content.


chubbar's picture

 Is this DavidPierre?

Sokhmate's picture

I'm curious, can you name one of those few deflation idiots? (serious question)

CrazyCooter's picture

Mish (Mike Shedlock)?


CrazyCooter's picture

Mish (Mike Shedlock)?


TheGreatPonzi's picture

Every deflationist out there, famous or not. Deflation could happen if:

1) Deflation would not mean the immediate death of everything (as deflation is lethal for a Ponzi scheme)

2) There was some form of standard preventing governments and central banks from printing

3) Governments were not risking default

4) Governments and banks were honest.

THE DORK OF CORK's picture

My one concern for Gold is that the ECB may decide to implode Ireland's deposit base once all of its client bond holders are made whole.

If they make clear that Ireland was a one off and deserves its faith given its recklessness blah blah blah it may confer value to the remaing deposits in the euro zone.

This would be formidable nuclear weopan in the CBs arsenal.


Bastiat's picture

Try graphing the last 10 years or so of gold on a logarithmic scale.  Projecting from a linear regression (on that scale) for the whole series, I get around $1,650.  However, fitting to the last 4 years I get around $1,750.  FWIW.