The long term view of Gold shows that as $4 dollars is to corn, and $40 dollars is to gold, the chart above suggests that the $700 dollar area is most probably the PIVOT point for gold.  We can see that although 1980 did have a spike to $875, the chart reveals that 700 (or just slightly above it) was where the price rise was really contained.  The 2006 high was also at 700 and spent almost a year and a half bouncing off that area before it blasted thru to 1000.  Finally, the subsequent 2008 meltdown low was right at the $700 dollar area.  We think the weight of the evidence suggests that $700 is indeed the new pivot.

From this chart we can see that gold’s price has been trading in its second channel from the top and like crude’s drop below its channel to its $40 dollar pivot point, gold’s drop during the same meltdown pierced its channel and dropped all the way to $700, its pivot point.  The subsequent bounce back into its channel for the past 12 months is now reaching the upper boundary of its channel line.  That line is pointing to the 1100 dollar area in the October/November time frame.  Like Crude, Gold is also due for a seasonal pullback at this time of the year.  Therefore we should be cautious when gold reaches the 1100-1150 area should that price level be realized over the next 2-4 weeks.

Now with that said, the question arises as to whether gold could break above that channel line.  Usually channel lines, when broken, are the result of price having tested and bounced off it for a period of time.  In this case, while there have been no price hits on this channel, we see that the highs of 2008 were very close to touching that line.  And the latest bar on the chart is also very close to touching that channel.

Sometimes there are price spikes that develop at these price points.  The 1980 high is one example.  But more to the point, 1983 and 2006 witnessed spikes above the red channel line.   The potential for gold to do the same on this current rally is a strong possibility as well.  The most incredible thing about gold is that it is the only well known commodity to be making NEW HIGHS since the meltdown.

It is an amazing thing that less than 2% of the population own form of gold.  In fact, Doug Casey’s work shows that there is only about 1 ounce of the metal available for each person on earth.

That leads to the next question, how much paper money is there on earth?  At last look in 2008, it was estimated that there would be about $3000 per person on earth should it be divided up equally.  Now there are a lot more complex ways to arrive at what price of gold should be, but even in this simple method it shows that equally speaking, the price of gold should be at least $3000 per ounce.