Schroder Investment Management Says Gold to $5000 per Ounce. Is it Probable?
19 June 2008
Another surprising announcement from a 'name' financial management firm that ought to be in a position to have an informed opinion arrived on the news. Yesterday both Morgan Stanley and the Royal Bank of Scotland forecast a meltdown in financial assets, and today Schroder Investment Management posits the shocking target of $5000 per ounce for gold.
Obviously we cannot address this type of a forecast, or even intelligently surmise if Schroder is basing this on a realistic extrapolation from the course of the financial crisis, or is just talking their book, in the same way some were forecasting Dow 36,000.
We do believe strongly that at some point the ratio between the Dow Jones Industrial Average and the price of gold in dollars/ounce will be "2" and perhaps closer to "1" but cannot say if this will occur at 2,000, 4,000 or 5,000.
What we are also convinced of is that at some point the train will leave the station, the boat will leave the dock, and if you are not on it before it leaves finding a place of any substance will not be easy, and may not even be possible for some time.
Consider the question, how many fiat currencies have lasted for more than 100 years before being replaced and devalued because of the ravages of inflation?
Let's hope we do not see this, as it will represent a significant deterioration in the purchasing power of the dollar and the pound and probably a few other currencies. But given the other forecasts of the past few days, and the outrageous actions of the Federal Reserve in corrupting their base assets, we are not as surprised or skeptical of this forecast as we might have been only a month or so ago.
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