The glib answer, and the only answer - see the chart above, is $US 195.50. That's 29.87% above Golds' spot future close on April 28. But let's look a little deeper into the subject to see what we can come up with.
Over the first four months of 2006, $US Gold is up 26.13%. A repeat performance over the next four months would put the spot future Gold price at $US 825.50 on August 31. If the present performance was continued at the same rate into September, the spot future price would hit $US 850 on or about September 18. OK - that's one answer - mid September 2006.
Here's another answer. In the month of April, the spot future Gold price has risen from $US 581.80 to $US 654.50. That's up $US 72.70 or 12.50%. Maintain that rate of climb and the spot Gold price would finish May at $US 736.30. It would finish June at $US 828.30. Assuming the rate of climb remained constant after that, spot future Gold would hit $US 850 on or about July 8. That's a Saturday, so let's say the following Monday - July 10.
Of course, all of the above assumes something that won't happen, and that is Gold maintaining the exact same rate of advance against the US Dollar that it has maintained thus far in 2006. That doesn't happen in markets. Not ever. As you have already seen, nearly half of Gold's advance in US Dollar terms over the four months of 2006 occurred in the month of April just ended.
Can we then say that Gold's price advance is accelerating in 2006. Nope, not in any uniform manner. In percentage terms, $US Gold was up 9.09% in January. It was down 1.21% in February. Then it rose 3.17% in March. And now, in April, it has surged by 12.50%. What we can say is that all but $11.00 of Gold's $US 135.60 rise since the start of 2006 has come in January and April.
There are really only two. The first is at or about the $US 710 level. This is as high as Gold reached in September 1980 after the rally from the January - April 1980 correction which saw the price plummet from $US 850 to about $US 480. From that $US 710 high in September 1980, Gold's first "bear market" saw the price fall all the way down to $US 296 by June 1982.
The second resistance area is, of course, the $US 850 level itself. Gold's never been higher in US Dollar terms.
Please refer to the table we published here last week. Note the price increases in all the items listed since January 1980 - and the contrast with the decrease in the $US price of Gold and silver since then. Gold at $US 850 would bring the $US Gold price performance since January 1980 on that table to 0.00%. Clearly, it would still be lagging WAY behind the other price rises. Yes, Gold will assuredly get to $US 850. Whether it gets there next month or next year is not the major issue here. The major issue is that even at $US 850, the $US price of Gold will reflect NONE of the MASSIVE inflation which has occurred since it was last there in January 1980.
Here's something else to consider. The first time that the spot future price of Gold ever closed above the $US 650 level was on January 14, 1980. FIVE TRADING DAYS LATER, on Janaury 21, 1980, it hit what is still its all time high spot future close of $US 850. One day after that, it closed at $US 737. Spot future Gold has only ever closed above the $US 800 level twice since Gold and the US Dollar were separated in August 1971. Those two days were January 20 and 21, 1980. There have only been ten trading days since August 1971 when Gold has traded above the $US 700 level - seven in January/February 1980, three in September 1980. At its present $US 654.50, the spot future Gold price is getting into pretty rarefied territory.
This is the major feature of present Gold bull market ever since it got started. The "wall of worry" does not exist so much in the accumulation of the metal itself, especially outside the major western market centres. But it most certainly does exist in regard to paper claims to Gold (and the other precious metals, including Silver) of all descriptions.
A week ago, the major headlines in the local Aussie papers were along the lines of "Gold Price Crash". Last Thursday - April 20, the spot future price plummeted $US 31.00 in intraday trading ($US 642 to $US 611). Silver, of course, was much more spectacular. On April 20, the spot future close plummeted a massive $US 2.00 or 13.8%. That fall can legitimately be described as a "crash". On "Black Tuesday", October 29, 1929, for example, the Dow crashed a "mere" 12%.
In the futures markets, in the Exchange Traded Funds (ETF) markets, and in the market for Gold stocks, investors are getting whipsawed unmercifully. Gold stock indexes, in the US, in Australia, and elsewhere have been gyrating 3-6% a day as the "volatility" of precious metals prices increases. The last time that the spot future Gold price closed below the $US 600 level was just over two weeks ago on April 13. In the ten trading days since then, there have only been three when Gold did not go up or down more than $US 10.00. Almost nobody is simply riding it out, the rest are selling today and buying back tomorrow.
The extent to which the current acceleration of the Gold price is distrusted in paper market circles is perfectly illustrated by the Privateer compiled "XGO" Aussie Gold stock index. The index set a high of 2935 way back on February 7 when the $US Gold price was $US 550. That high was only surpassed on April 19 and 20 (before the big falls in Gold and Silver prices in the US on April 20) when the XGO broke above the 3000 point level to close at 3007. On April 28, the XGO closed at 2929 back below its February highs when the $US Gold price was MORE THAN $US 100 below where it is now.
Since the end of the 1970s, there has only been one REALLY good Gold stock bull market. That one was in 1985-87. It was ended by the October 1987 crash, during which Gold stocks suffered worse than almost any other stock category. And while most other stock categories are multiples of the levels they reached before the crash of 1987, Gold stocks have yet to regain those levels. Gold stock investors are long suffering and very easily spooked.
So are almost all investors when it comes to investments which are not linked to PAPER-BASED "assets". A boom in commodity prices in general and precious metals prices in particular goes against the investment grain of the past quarter century. Throughout that period, the really "big money" has been made in stocks, bonds, currencies and their myriads of debt-based derivatives. Habits formed and ingrained over such a long period of time die very hard indeed.
The great handicap that most investors bring to what is happening in the precious metals markets now is that they have little or no knowledge of the NATURE of money or of the fragility of the paper investments which they have been playing with for their entire adult lives. A soaring Gold price makes them irritable and confused. That's supposed to be an "inflationary indicator", but Washington and Wall Street are telling them that inflation is "minimal". Gold and Silver are to them, exotic and inherently risky investments. After all, weren't they in a bear market for decades when everybody was getting rich on paper?
The "debate" over whether and when $US Gold will regain its highs of January 1980 is one symptom amongst many of the vast majority of investors' inability to let go of a paper money system which is in its death throes. Name any other basic commodity or consumer good which existed in 1980 which is now priced at anything like the level it was then. At present levels, Gold and Silver prices are still WAY below their 1980 highs. Even when they reach them, they will still be massively lagging the price rises which almost all other categories of REAL goods have enjoyed since then.
The REAL answer to "How Far To $US 850" is - who cares? Get there we will, and even when we do, we'll have 26 years of rampant monetary inflation still to go.