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40 years on from gold standard, bugs crow

40 years on from gold standard, bugs crow

Gold is back, for good.

August 13, 2011 9:44 by

are firmly in place for gold to continue its rise,” he says.

Traditional investment commentators have dismissed gold — which, with no “intrinsic” value of its own, is only really as valuable as a buyer thinks it is — as a classic bubble.

But those who have predicted its crash since it rose above $700 an ounce in 2006, on a simple “what goes up, must come down” analysis, have consistently been proved short-sighted.

Gold prices traded in a relatively narrow range from $250-420 an ounce for the whole of the 1990s. They have since more than quadrupled from that high, peaking at a record just below $1,800 an ounce earlier this week.

Their rise accelerated sharply from 2005 onwards, breaking through $1,000 an ounce in 2008 as the weaker dollar fuelled demand for alternative stores of value.

Now gold bulls are predicting that prices, now around $1,750 an ounce, but still short of an inflation-adjusted high of nearly $2,500 in 1980, could climb even higher.

“I believe the price of gold will rise irregularly over the next several years, possibly reaching $1,850 an ounce by the end of this year, breaking above $2,000 in 2012, and possibly $3,000, $4,000, and even $5,000 in years to come,” says Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic advisor to Rosland Capital.

“At the heart of this forecast is my observation (or belief) that the United States and, to a lesser but still significant extent, Europe have been living beyond our means for decades.”

Back in 1896, losing presidential candidate Bryan’s Cross of Gold speech turned the watching crowd into “a wild, raging irresistible mob”, the New York Times reported.

Gold bugs, often accused of sensationalism, are finding their passion is becoming mainstream. “Raging” is probably no longer a suitable description of them. “Irresistible” is increasingly nearer the mark.

(Reporting by Jan Harvey, editing by William Hardy and Richard Mably)

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