The Price of Gold in Three Years

My friend, Maarten, has stated to me that the price of gold will reach $10,000/ounce in three years. In response, I offered to bet him $50 that it wouldn't get that high. He then asked if I'd say he won if he was within 20% of that price. I immediately accepted the adjusted bet.

If Maarten really believes the price of gold is going to sky-rocket over the next three years, he shouldn't be betting with me; he should be buying gold. Or maybe buying futures in gold (see here  or the chart below for the price of gold, delivered in December 2012.

Or he should be buying call options on gold for December 2012. 

I think I understand Maarten's argument. The US deficit, combined with the non-negligible possibility of war in the mideast, could easily lead to both inflation of gold prices and considerable unease in major economies. In these instances, gold might be viewed as a safe haven. But I just don't see how those changes can possibly lead to a more than 7-fold increase in the price of gold over the next three years.

And apparently, judging from the futures prices of gold, most speculators seem to think the price of gold will rise a bit, but not much:

Month Click for chart	Session									Pr.Day			Options
	Open	High	Low	Last	Time	Sett	Chg	Vol		Sett	OpInt
Nov 09	-	-	-	1106.0 *	Nov 16, 17:41	-	-	21		1138.6	147		Call Put
Dec 09	1131.5	1133.5	1131.0	1133.5	Nov 17, 10:17	-	-5.7	73462		1139.2	269945		Call Put
Jan 10	-	-	-	1107.3 *	Nov 16, 17:41	-	-	110		1140.0	107		Call Put
Feb 10	-	-	-	1140.7 *	Nov 16, 17:41	-	-	5901		1140.7	118940		Call Put
Apr 10	-	-	-	1109.1 *	Nov 16, 17:41	-	-	647		1141.8	37725		Call Put
Jun 10	-	-	-	1110.2 *	Nov 16, 17:41	-	-	229		1143.0	16593		Call Put
Aug 10	-	-	-	1111.6 *	Nov 16, 17:41	-	-	3		1144.5	9438		Call Put
Oct 10	-	-	-	1113.3 *	Nov 16, 17:41	-	-	-		1146.1	4558		Call Put
Dec 10	-	-	-	1115.3 *	Nov 16, 17:41	-	-	621		1148.1	22716		Call Put
Feb 11	-	-	-	1117.8 *	Nov 16, 17:41	-	-	-		1150.6	2533		Call Put
Apr 11	-	-	-	1120.6 *	Nov 17, 07:38	-	-	-		1153.4	1716		Call Put
Jun 11	-	-	-	1123.8 *	Nov 16, 17:41	-	-	-		1156.6	10709		Call Put
Aug 11	-	-	-	1127.6 *	Nov 16, 17:41	-	-	-		1160.4	250		Call Put
Dec 11	-	-	-	1136.3 *	Nov 16, 17:41	-	-	-		1169.0	11670		Call Put
Jun 12	-	-	-	1151.8 *	Nov 16, 17:41	-	-	-		1184.5	3643		Call Put
Dec 12	-	-	-	1170.2 *	Nov 16, 17:41	-	-	1		1202.9	8011		Call Pu

Comments

[Joshua]

Is $6,300 fair value for gold?

http://tinyurl.com/yjmc8lp

[Dredd]

If the gubmnt believes him guess what they will do in order to buy up some of that gold?

http://powertoxins.blogspot.com/2009/11/power-that-counterfeits.html