LJ,
I can't disagree with your statement. The precision of $529 is a bit absurd. Still, I think there are several methods that could be used to arrive at an interesting range for the "real" value of gold. As NSP mentioned last week, Paul Van Eeden wrote an interesting piece on what the price of gold should be. Van Eeden thinks $740 is a fair value, and if you are interested you can read his reasons why here.
kitco.com
I think it would be interesting to select some standard goods and services (gas, range of foods, clothing, appliances, dental service, etc) and obtain historical prices for 1920, 1934, 1971, and 2004. We would use the fixed and then free market prices for Gold for each of those years and determine if POG today is valued lower relative to the value of goods it could have been exchanged for in 1920, 1934, and 1971. We would have to make some adjustment for wages, and I am not sure how to do that, but IMO the end result of this exercise would indicate that gold is vastly undervalued at the current price.
$529 is much too low, but I don't think Sinclair is going to have any issue with movement to the upside of his target.
Good Trading.
TH |
