Thursday, September 24, 2009

Gold headed to $5,000?

AlphaNinja - Just sharin':

Schiff, who was quite right about much of the trouble we're seeing with the economy, sees gold headed to $5k an ounce . That said, he also see's a 90% drop in the DJIA, which is utter nonsense.

1 comment:

  1. "...I would not be surprised to see the Dow:Gold price 1:1...maybe a 90% decline in the price of the DJIA, *measured in gold.*" is what Schiff says.

    If we put gold at $5,000 and do the calculation with today's dollars, I get:

    Gold: $1,156.00/ounce
    DJIA: $11,123.11
    DJIA price in gold: $11,123.11/$1,156.00 = 9.62 ounces to buy the Dow

    Schiff's prediction:
    Gold: $5,000.00/ounce
    90% drop in the price of DJIA *IN GOLD*: .1 * 9.62 = .962 ounces to buy the Dow
    DJIA price in dollars: $5,000 * .962 = $4,811.03
    Change in DJIA in dollars: ($4,811.03-$11,123.11)/$11,123.11 = -56.75%

    So, measured in dollars, the Dow declines by 56.75% in Schiff's prediction. Doesn't sound so crazy to me...