How Far Can Gold Go
By Dr. Steve Sjuggerud
How far can gold go?
Farther than you can imagine... That's the
I laid out the case for gold back in 2002...
Quite frankly, the reasons to buy gold that I
laid out in 2002 are still in place today. So it
really could go much higher.
How about oil? How far can oil go?
The answer is the same... farther than you
How much lower can housing go? Or
The answer is the same, much to my chagrin.
They can fall farther than you can
I'm choosing my words carefully here...
They can go farther than you
can imagine... but it doesn't mean they will.
The point today is, most people don't
believe they can...
You see, you and I have well-developed
beliefs... behaviors... and survival mechanisms.
We are built to survive. The problem is many of
those innate behaviors are the exact opposite of
what you need to make money in the financial
markets. Let me test you about this by asking a
Do you think gasoline is expensive right now?
Well, why do you think that? What do you think a
fair price of gasoline is? $1 a gallon? $2 a
gallon? And why do you think that?
It's easy to simply read the price each day
as you drive by the station... then compare that
to what it said five years ago. But as the chart
below shows, your biases can mislead you.
The black line is the price of a gallon of
gas. The blue line represents the ratio of a
gallon of gas to a barrel of oil.
It turns out gas is extremely cheap...
Relative to the price of crude oil, the gas you
put in your car is actually cheaper than it's
been in a very long time.
If you don't think gas is cheap, you're
falling prey to two things that get most
The technical names are "availability bias"
Availability bias means that people are
overly influenced by what easily comes to mind.
And anchoring refers to people's tendency to
arbitrarily set some initial estimate of value
and use that as an "anchor" versus the present
True Wealth subscribers have made a
fortune off of these biases... For example, we
bought shares of BHP Billiton when it traded in
the teens. We sold it once and bought it back
again. We still own it, and it's now in the
We bought it when oil was around $50, and
copper was around $1.50. Analysts were
forecasting BHP using these two biases. They
estimated the future price of oil at $25, and
copper at 80 cents. Now, oil is at $100 and
copper at $3.
To me, the best estimate of tomorrow's gold
price or oil price is today's price. That's as
far as my forecast goes. Anything else from
anyone else is simply a guess.
I've seen these mistakes in real estate in
recent years, too... The most recent information
in people's heads was that "you can't go wrong
in real estate" – the availability bias came up
and bit 'em. And now they're hit with the
problem of anchoring. They think their home is
worth $600,000. But it's worth more like
$400,000. We're not seeing many home sales
because people are stuck with their anchors...
they're not responding to reality.
You can do two things with this information:
||You can try to
catch yourself when you're succumbing to it.
We all do it, all the time. But these biases
can ruin investment returns.
capitalize on it when you see others
foolishly falling for these things, like
analysts did with BHP Billiton a few years
Is a gallon of gas cheap? How high can gold
go from here? How high can oil go? How far can
housing prices fall?
Can oil go to $200? Or gold to $2,000? You
betcha. I'm not saying they will, I'm saying
Get rid of your anchors and your other price
biases... and you'll discover that things can go
much farther than you think can be possible.
By understanding this, you can make a lot
more money than before, as you'll understand
that things can go, and go, and go, and go.