How Low Can Gold Go? $587 an ounce!

Jason Hommel from the Silver Stock Report analyzes how low Gold and Silver can possibly go revealing a true margin of safety and a momentous buying opportunity.

Jason uses numbers from M3 – Total Money Supply – to find the real prices of the metals. Here is a brief overview of his findings. The full article can be found here.

1964 M3: 408 billion –last year of silver coinage ($1.39/oz. for silver, former low)
1971 M3: 685 billion –last year dollars could be redeemed for gold. ($35/oz. for gold, former low)
1980 M3: 1.823 trillion –high of gold ($850/oz.) and silver ($50/oz.)
2007 M3: 11.5 trillion

Silver’s 2007 inflation adjusted low (from 1964): $39/oz.
Silver’s 2007 inflation adjusted high (from 1980): $315/oz.

Gold’s 2007 inflation adjusted low (from 1971): $587/oz.
Gold’s 2007 inflation adjusted high (from 1980): $5,362/oz.

Jason also points out an interesting proof to his mathematical hypothesis.

Surprisingly, gold was recently as low as $255 in mid 1999, almost eight years ago now. At that time, there was less paper money than there is today. In fact, you may not realize it, but in January, 1999, M3 stood at only $6.08 trillion, about half what it is today. That means the 1971 inflation adjusted low price for gold in 1999 was $310/oz.!

If so we stand no different then those audacious souls who bought Gold at $35 an ounce in the early 70s before it skyrocketed to over $800 in 1980.

How Low Can Gold Go?
Jason Hommel
February 21, 2007


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