Gold Price Is Going To $25,000

Last week I wrote a column on MarketWatch that seems to have stirred quite a bit of debate. Within the column, I was pointing to the potential for a multi-decade rally to be seen in the metals and mining stocks. It seems many of you had very strong feelings that this was simply not possible. Over the next few weeks, I will attempt to address the concerns many of you have presented in your comments to my piece.

First, I would like to point out that Elliott Wave analysis is used to track market sentiment. We use it in conjunction with Fibonacci mathematics to identify turning points and targets with our analysis. Again, as I noted, that is how I came up with my topping target for gold in 2011, which was within six dollars of the actual high. It is also how I came up with my downside target and expectation that gold will likely be cut in half from the high I expected.

However, just because I caught two important long-term moves in the metals clearly does not mean I will be correct about the next one. Of course, I understand that perspective. My analysis simply focuses on what is the greater probability being presented by market sentiment, as calculated by Fibonacci mathematics.

Next, I would like to point out something upon which many people did not pick up. I am not looking for the NYSE Arca Gold BUGS Index HUI, -0.20%  to go directly from where we are right now to 15,000 within the next 10 years, as some suggested. I am first expecting the HUI to drop down to the 100-125 region for a long-term low. From there, I am expecting it will rally for a few years to take us back toward the prior market highs, and then consolidate for another few more years.

This will then lead us to the parabolic phase of the long-term rally with a first move to the 2000 region in the HUI, which can be completed in approximately 20 years. Therefore, I expect a fourfold to fivefold increase in the HUI within the next five to seven years, with a fifteenfold to twentyfold increase in the HUI within the next 20 years. Ultimately, the 15,000 target in the HUI, and $25,000 target in gold GCQ5, -0.06% is a 50-year expectation, not a 10-year expectation.

But the most important perspective I gleaned from the comments was the uniformity of disbelief. Out of over 700 comments to the column, I think I counted two, yes, only two, that actually viewed this perspective as possible. Now, I may even have to discount those two, as they could simply be long-term gold bugs who appreciate any column which calls for a parabolic rise in the price of gold. But it is resoundingly clear that readers are uniformly in the "disbelief" camp.

While this is only anecdotal evidence of market sentiment, the column did reach a sizeable audience. So, I have to assume that many view this type of appreciation in the price of gold as "impossible" or "ridiculous," as many of the commenters noted.

One thing we glean about market sentiment is that when it reaches an extreme in one direction, the exact opposite of what the herd believes will occur is usually what actually occurs. So, while I still see lower levels being struck before the bull market takes hold, it does seem as though the majority of the commenters who posted to my columns will have no desire to buy gold or mining stocks at those next lows. Rather, it is quite clear that gold is out of favor in the public's eye. That is the exact sentiment environment needed to ignite the next bull market in metals.