Last Updated on September 18, 2020
Predictions about Anything Are Just Guesswork
An intelligent person who is well informed about any subject can make much better guesses than some “know-nothing.” Thus, here are the factors that I would consider before making my guess about price of gold 10 years from now.
The Price of Gold in the Future Depends upon Many Factors
Demand? Gold is used mainly for jewelry and for coinage (hoarding). There are also some industrial/medical uses.
The industrial uses as in dentistry, for instance, are phasing out and being replaced by better and cheaper substitutes.
But my educated guess is that in the next 50 years there will always be enough demand to support the present prices (adjusted for inflation). As long as there is no big change in the supply. My guess is that production costs will be constant in inflation-adjusted fiat money.
Supply? The cost of transforming gold beneath the ground into pure bars and coins generally goes up over the long term with the value of the currency in which it is valued.
Thus in terms of the Swiss Franc, it has been stable to falling. But in terms of the USA dollar, over the long term, it has been rising at roughly the inflation rate. Thus, if there were no other variables, the spot price of gold, would be increasing by roughly 5% per year.
Variable Affecting Price of Gold
There are a lot of variables! The cost of production could go down drastically if new technologies or new easy-to-mine gold came into play. Getting gold from seawater or mines on asteroids is unlikely, but possible.
If there are wars or financial crises, these events would impact the demand for gold. This usually increases the price substantially. No one can predict a crisis with any accuracy.
High-interest rates usually mean a decline in gold prices, because gold has holding costs (storage, insurance, etc.) and pays no interest.
Thus if the going rate of interest (i.e. the real return) far exceeds the inflation rates, gold prices go down substantially in that currency.
Crypto-currencies in Place of Gold?
Will crypto-currencies replace gold as a store of value? IMO, no. Only because a substantial number of people will prefer holding onto something tangible like gold coins — as opposed to the option to purchase a digital asset floating in outer cyberspace.
What the Future Holds with Respect to Gold
Will the supply of gold increase dramatically? IMO, no. Most gold is in very strong hands like central banks. It is not for sale. The USA made a huge mistake years ago, of selling gold to keep the price low. Anyone who does that is fighting the course of history and will be able to affect the price for a time, but not forever.
Will the Price of Gold Ever Go Crazy as in a Short Squeeze?
Right now, the price of physical gold is kept down by short sellers of “paper gold” the ownership of paper gold positions, like cryptocurrency depends completely on “faith”.
If paper gold holders ever make demands for physical gold, the price of coins and bars could skyrocket.
One could write volumes on this subject, but this was a very short list of some of the variables to consider.
Where Does This Take Us in Terms of the Original Question?
My best guess is that the price of gold in 10 years should be up in dollar value by around 50% or 60% in 10 years. In other words, around 5% a year.
Physical gold is a good gamble because there is a small likelihood that there will be a “run” on paper gold. This would cause the bid prices on physical gold to rise to almost undreamed of heights before settling back to more realistic levels.
Thus, the price in 10 years is most likely to be around $2000 per troy oz. It could be as low as $1000, and there is a small chance it could briefly hit $15,000 or more per oz.