Gold: Is $1,000 an Ounce in the Offing?

Source: Seeking Alpha  (10/9/07)

John Hathaway, Senior Managing Director and Portfolio Manager of Tocqueville Asset Management, from a recent interview with Barron's online: "..."I don’t think it will take much to get us to $1,000 an ounce. Let’s not forget, in 1980 dollars, gold is less than half of its nominal price today."


...Last week, Barron’s online published an interview with John Hathaway, Senior Managing Director and Portfolio Manager of Tocqueville Asset Management. Hathaway is managing the Tocqueville Gold Fund (TGLDX), which is the fund that I chose for my taxable accounts. In the interview, Hathaway offered his views on a range of issues related to gold. These included gold production, the relationship between the U.S. dollar and gold, and also discussed the different perspectives that are held by gold mining companies. There are several items in the interview that were of interest to me, particularly inflation and gold, and the future price of gold.

Here are some excerpts from the interview:...

What gets us to the magic number of a $1,000 an ounce?

I don’t think it will take much. Let’s not forget, in 1980 dollars, gold is less than half of its nominal price today.

The disparity between the amount of paper that has been created since 1980 and the amount of gold that has been produced since then is just enormous. The ratio of financial assets to physical gold is at the low end of a historical range. If you were to mark all the gold to market that has ever been mined, which is a very conservative approach, and then take the valuation of all the global stock markets and all the global bond markets, gold represents about 3%, compared with a figure in the mid-20% range in 1980, which was the top of the bull market in gold and the beginning of the bull market in financial assets.

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