$1,000 Gold: How Much Higher & When?

Gold climbed past the magic $1,000/oz mark for the first time today.

The US Dollar Index (USDX) hit an all-time low of 71.60 this morning as well.

I’ve shown how gold has been inversely tracking the USDX for the last few years. [See the Feb 28 post.]

According to one of our heroes, Jim Sinclair, gold is tied to the dollar and the Fed will allow the dollar to descend to 52.00 before rescuing it with a modified gold peg. When this happens, the price of gold will then plateau (as opposed to dropping like it did in 1980).

So the big question becomes, “When will the dollar hit 52.00 and what will gold command at that time?”

USDX-Gold 2008-03-13I charted a potential answer for you. Click it to zoom in.

I’m no technical analyst, but I do know how to draw a straight line–actually two of them. One shows the dollar decline over time, the other portrays gold’s climb as the dollar falls. We end up with a “magic price box” for gold where the events (dollar hits 52.00 vs gold’s price at that time) coincide.

Will it actually happen this way? I don’t know. But the trends are interesting. If it does unfold like this you’ll wake up one morning in early 2011 with gold at $2,500/oz. My “official” prediction for gold is $3,300/oz by end of 2011 and I see no reason to change it now.

I think when the dollar panic hits, gold and silver will go parabolic. Silver will still reach greater heights, percentage-wise, but I expect it to fall back down a ways. Picking a top in silver will be more important to your investment that picking a top in gold.

I truly feel sorry and worried for anyone still in the stock market now. I salute you holders of physical gold & silver. Your foresight in acquiring a physical store of wealth offers your family the protection they will need in the coming 48 months.

◊◊◊◊ Now: Gold @ $1005.00, Silver @ $20.80, USDX @ 71.80 ◊◊◊◊