Gold hitting $9,000 and $50,000 – Are these legitimate forecasts for gold prices?

After a disappointing 2013, gold has started off the year doing quite well, despite finishing at a one-month low during the Monday trading session. Nevertheless, some Wall Street traders and contrarian investors see gold hitting new highs in the near future.

One forecast that has been making headlines was made by James Rickards, portfolio manager at West Shore Funds, in which he suggested the yellow metal could rise anywhere from $7,000 to $9,000 within the next three to five years.

There will be four major factors that play significant roles: fundamentals, a crash in the stock market, a collapse in the confidence of fiat currencies and the supply of gold worldwide being on the decline.

“One of the reasons gold did so poorly in 2013 was because 500 tons were taken from [the gold ETF] GLD warehouse by authorized dealers and dumped on the market,” Rickards told Yahoo! Finance on Monday.

Rickards isn’t the only investor to have high hopes for the precious metal. Jim Sinclair, a financial author, recently predicted in a YouTube video that gold will reach $50,000 by the year 2020, a difficult and substantial increase from today’s prices of $1,330. Sinclair cited hyperinflation as the culprit for rising gold prices.

“We are facing the annihilation of currency. We are facing the shift of America as the leading and most influential nation of the world to some form of banana republic. . . . If it wasn’t for food stamps, we would be facing long lines of people waiting for free food,” said Sinclair. “I think the dollar gets hammered. I believe we are headed for hyperinflation.”

It appears that the most conservative estimate for rising gold prices comes from Peter Schiff, president of Euro Pacific Capital, who has called for $5,000 per ounce repeatedly.

The quintessential question has to be: is there any validity to these forecasts? Here’s what Gary North had to say about these predictions, at least when it comes to Sinclair’s recent forecast:

“Mr. Sinclair believes that when commodity futures investors start to demand delivery of gold, this will drive the price of gold up. I ask this: Has this happened to any commodity in the past? The answer is no. He knows this. He says that the Comex may start settling gold contracts in dollars. I think he is probably right. But that doesn’t mean that gold is going to $50,000 as a result. People speculate in commodity futures in terms of U.S. dollars, in order to get more U.S. dollars, not to get gold. When they can get more dollars, they take the money and run. They did not intend to take delivery. They just want their leveraged returns, paid for by those on the other side of the contracts.

“Commodity futures trading is a zero-sum game. There is someone long and someone short. The gains one will make will be paid for by the other. He sees a 38-to-one increases. Why gold alone? He did not say. Hyperinflation will have this effect on all commodities.

“If you think his scenario makes no sense, that’s because you are not suffering from a senior moment. But if you think it does makes sense, and you are under age 70, see your doctor. Or your psychiatrist.”

It’s inevitable that gold will rise in value, but perhaps the financial professionals should refrain from making such bold predictions. There are still articles and videos pointing out the fact that gold and silver have not hit highs that Schiff projected a few years ago.

Gold is dependable, reliable and sound and should be owned by everyone. However, acquire gold to protect your wealth rather than trying to make a fortune off of it. It’s difficult to pinpoint when gold or silver would hit a certain number because there are numerous factors that could change the direction of gold prices.

Remember, gold is for protection and any profit is just a bonus.

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