It must be a full moon.
That's when the crazy predictions seem to come out.
A spot gold price as high as US$1,900 an ounce is just one of those. That's the prediction from renowned gold bull Robert McEwen. Speaking at a gold conference yesterday, McEwen says that record low global interest rates will cause a huge amount of anxiety for investors and they will be forced to turn to gold as a store of value and an alternative asset.
Unfortunately, that's exactly why the gold price is currently trading at around US$1,318 an ounce. Hence the large recovery in the metals' price since the start of this year when it traded as low as US$1,052 an ounce.
But McEwen thinks the metal could trade in a range of between US$1,700 an ounce to US$1,900 an ounce by the end of this year as confidence in the economy falters.
There's just one problem with that.
The US Federal Reserve is more than likely to begin raising interest rates soon, whether it's this month on later in the year. When that happens, the gold price is more likely to sink towards US$1,000 an ounce than start rising.
Gold prices did reach an all time high of just above US$1,900 an ounce in 2011, but the world was a very different place then.
McEwen also expects the gold price to reach US$5,000 an ounce in four years. According to media reports, McEwen gave the same outlook in 2009 and 2011.
If you keep making the same predictions over and over, eventually you are bound to eventually get it right (or perpetually wrong).
I highly doubt the CEOS of gold miners like Newcrest Mining Limited (ASX: NCM), Northern Star Resources Ltd (ASX: NST), Evolution FPO (ASX: EVN) are pinning their hopes on a gold price of US$1,900 an ounce. I could imagine they are paying as much attention to McEwen's forecasts as I will.
Even at the current price of US$1,318 an ounce – or A$1,747 an ounce at an exchange rate of 75.4 US cents, Australia's largest gold miners are making a mint.
Foolish takeaway
Predictions of US$1,900 an ounce within the next 3 months are highly fanciful and more attention-seeking than anything else. We are likely to see gold prices pull back from their current levels rather than rise this year.
