What Will the Price of Gold Be in January 2014?

By Jeff Clark, Casey Research

While many of us at Casey Research don't like making price predictions, and certainly ones accompanied by a specific date, it's hard to ignore the correlation between the US monetary base and the gold price.

That correlation says we'll see $2,300 gold by January 2014.

There are plenty of long-term charts that show a connection between gold and various other forms of money (and credit). Most show that one outperforms until the other catches up. But let's zero in on our current circumstances, namely the expansion of the US monetary base since the financial crisis hit in 2008.

Here's the performance of the gold price compared to the expansion of the monetary base since January 2008.

You can see the trends are very similar. In fact, the correlation coefficient is an incredible +0.94.

Since the Fed has declared "QEternity," it's logical to conclude that this expansion of the monetary base will continue. If it grows at the same pace through January 2014, there is a high likelihood the gold price will reach $2,300 at that point. That's roughly a 30% rise within 15 months.

And by year-end 2014, gold could easily be averaging $2,500 an ounce. That's 41% above current prices.

Some may argue that there's no law saying this correlation must continue. That's true. And maybe the Fed doesn't print till 2014. That's possible.

But it's not just the US central bank that's printing money…

  • European Central Bank (ECB) President Mario Draghi has declared that it will buy unlimited quantities of European sovereign debt.
  • Japan's central bank is expanding its current purchase program by around 10 trillion yen ($126 billion) to 80 trillion yen.
  • The Chinese, British, and Swiss are all adding to their balance sheets.

The largest economies of the world are all grossly devaluing their currencies. This will not be consequence-free. Gold and silver will be direct beneficiaries –along with mining companies– starting with rising prices.

There are other consequences, both good and bad, of gold hitting $2,000 and not stopping there. We think investors should be prepared for the following:

  • Tight supply. As the price climbs and attracts more investors, getting your hands on bullion may become increasingly difficult. Delivery delays may become commonplace. Those who haven't purchased a sufficient amount will have to wait in line, either figuratively or literally.
  • Rising premiums. A natural consequence of tight supply is higher commissions. They won't stay at current levels indefinitely. Premiums doubled and more in early 2009, and mark-ups for silver Eagles and Maple Leafs neared a whopping 100%.
  • Swelling profits for the producers. If margins on gold production average $1,000 per ounce now, what will earnings be like when they average $1,500? At $2,000? Gold can rise much faster than operating costs, so this could happen. Imagine what this could do to dividend payouts, especially those tied to the gold price and/or earnings.
  • Tipping point for a mania. There will be an inflection point where the masses enter this market. The average investor won't want to be left behind. Will that happen when gold hits $2,000? $2,500?

The message from these likely outcomes is to continue accumulating gold – or to start without delay. Waiting will have consequences of its own.

People say that there's nothing certain in life except death and taxes. In my view, $2,300 gold is a close second.

13 thoughts on “What Will the Price of Gold Be in January 2014?

  1. Ag $75-100 and Au $3000-3500 in 2013. Petrodollar died on Sept 6th. QE3 forever and Operation Twist means USD is DOA. The EUR will collapse first and then bye bye Bucky within weeks.

  2. How about Gold hitting 1440 in early Feb, before starting it's next bull move
    The high for this year will be Oct 2012

  3. I been following gold and silver and being invested so if economies improve the demand will go up hence prices will go up, right now the demand is low and due to weak economies and money printing this again is pushing prices up, so its a win win whichever period we are in inflation or deflation. The reality is it is an asset and you can never lose on an asset if held for long enough. As incomes rise around the world so do asset prices, thats a fact. So prices will be correcting themselves for sure and at anytime the markets could crash by 30 to 50% but gold and silver will always come out on top just like other precious metals, agriculture, oil and other assets. There is never a bad or wrong time with buying assets as long as understand that you make your profit when you buy folks. Silver and gold is a buy.

  4. greg !! you 100% right
    whatif it happens 2028 , gold 3000 while malia obama is elected(( just joking :)) and 2012 gold 500 intraday - im strong pessimistic in electronical gold trading and very bullish silver bars & coins - i do recognize cycles which most likely are astrology- timeframe 4 - 16 yrs and gold will rise exponentially

  5. ok...so please reccomend and include more gold, silver and miner and etf plays that we can trade at short term, long term and intermediate term ...if this "gold" is a good play long term through 2014... then we should make money all the way and take advantage on non long positions on dips to trade shorter term..please ocmment and begin this journey in the dialy videos..also nat gas and related stocks ad etf are feeling friendly again...tx!!!

  6. Alex and MOF, just what is the reasoning behind your price predictions? The money supply has been more than doubled. Quantative easing without limits has been announced. The Audit office has announced years ago that by 2020 the US will not even be able to pay the interst on its debt.
    Secondly the demand for gold from Central banks has increased and is increasing rapidly. The supply of gold has shrunk across the world (reducing grades and new mines) and in South Africa its at a standstill.
    If the price of gold were to simply increase in line with the debt it should be in excess of $3000 now. Whether Obama or Romney is elected - their policies will not stop the exponential compounding of debt. The price of gold will rocket as a hedge to a bankrupt Western hemisphere.

  7. Your analysis is faltered. The monetary base you speak of is a basket of currencies called the dollar index. The actual cash dollar is not traded in the futures nor the spot market. A true valuation of the U.S. dollar can not be made based such a index. There is no true indicator of dollar value. If the dollar stops to float, the bull market in gold would be over. ...although there are supply side issues which would equate to no more than 30 of the current spot price of GC. Index funds hold to many position in gold. Of which have become stupid money that wags the tail of dog....they could bail on stop hunting. I am a gold bug, but for different reasons than just a hedge against the dollar. This is becoming old news. Before the bull market can reasonably move higher, the gold/silver ratio has to come closer to parity.

  8. 1-1-2014

    Romney presidency: Gold $1200, gas $3.50 unemployment 11%.
    Obama second term: Gold $1750 gas $4.75 unemployment 6.5%

    Romney ex-presidency: USA broken up into several countries after Civil War 2.0 US Dollar does not exist.
    Obama ex-presidency: Gold $2000 gas $7.00 unemployment 5%..

    1. You've got so many statistics wrong. You need to read, study, and pay attention to the over 900 executive orders Obama has signed.

  9. in 2014: $2500 per oz

    2018: $4000 per oz

    2020: $10,000 an ounce, except in the US, where it will be illegal for ordinary citizens to possess.

Comments are closed.