Predictions of lofty prices coming from regular hard-money advocates and gold bugs are certainly not hard to find. Predictions of $2,000, $5,000, $10,000 and $100,000 targets for the top in the gold market are numerous. But when a mainstream money manager of the highest esteem projects a major move higher in Wall Street’s most despised asset—gold, traders should sit up and take notice.
Speaking with Bloomberg on Wednesday, FX Concept’s founder, John Taylor, the man who pioneered the analysis of foreign exchange cycles, expects the gold price to soar to $1,900 by October, or a 20% rally from today’s price within a time frame of between 11 to 14 weeks.
Taylor sees gold as the ultimate safe haven asset while the developed nations deal with crushing debt loads; but he singles out the euro as the more likely currency in the U.S. dollar/euro cross to devalue against the other on the way down against gold during the next leg down in the global debt crisis, which he said could begin “within three or fours weeks time from now.”
Taylor also sees the euro dropping to $1.15 against the dollar during the next down leg. And, if correct, then, he expects the gold price in euros to achieve 1,650 euros per ounce by October, which calculates to a nearly 50% jump in euro terms. And it gets worse for the euro. By next year, the euro is going to par with the dollar, he said.
When asked why the euro has held up so well up til now, Taylor quipped, “because the dollar is so weak.” But as the euro zone flounders in the handling of Greece’s sovereigns, it will eventually become apparent that “the euro has to be restructured, and not just a little restructuring, but very, very significantly restructured to make it work,” he said.
But after the fireworks of new highs in gold in every currency, he expects the rally to turn ugly, as the second leg of the global debt crisis takes every asset down in a heap, including gold. And how far will the gold price drop as the U.S. and Europe plunge back into a deeper recession? Taylor believes gold will touch $1,100, a target which may seem incomprehensible during the gold mania, but will be the result, he said, of institutions and hedge funds scrambling to get liquid to meet redemptions.