Gold prices will top $1,000 an ounce in two to five years because of a currency crisis fueled by a continued devaluation of the dollar, a leading analyst and investor said.
Paul van Eeden of Toronto told Western mining interests that he does not expect gold prices to fall below $400 an ounce again.
"I say with a very high level of confidence that gold prices will go to $1,000 an ounce in the next two to five years," he said Thursday at the Northwest Mining Association's annual convention in Sparks.
Billed as the second largest annual mining convention in the U.S., the five-day gathering drew 1,800 people before it ended Friday.
Industry officials said van Eeden is among at least three dozen analysts who have predicted gold prices would surpass $1,000 an
ounce over the next five years.
Gold prices have soared since hitting a 10-year low of $252.80 an ounce on July 20, 1999. They closed at $631 an ounce Friday on the New York Mercantile Exchange, down from a high of $725 an ounce
on May 12.
Nevada is the world's third largest gold producer behind South
Africa and Australia.
Laura Skaer, executive director of the mining association, said van Eeden's projection didn't surprise her as the industry is enjoying an unprecedented boom cycle.
"It makes sense economically given the political unrest around the world," she said. "Gold over the last 200 years has been the preferred currency. It's where people go in times of uncertainty."
But John Dobra, an economics professor at the University of Nevada, Reno, said he does not foresee enough devaluation in the dollar to push gold prices above $1,000 over the next five years.
"Anything is possible, but I think the dollar will probably not depreciate the 30 to 40 percent required to get us there," he said. "That big a change in that short period of time is not likely based on historical experience."
Russell Fields, president of the Nevada Mining Association, also was unsure whether gold prices would reach $1,000 an ounce by then.
"I've seen gold prices do different things other than what some of the best forecasters have predicted," he said.
Van Eeden said rising gold prices have been tied to the dollar's devaluation. The dollar has dropped an average of 10 percent this
year compared with the pound, franc and euro.
Van Eeden said he expects America's increasing trade deficit to lead to an overall 35 percent drop in the value of the dollar against other currencies over the next two to five years.
"If that happens as I expect, gold prices will go over $1,000 an ounce," he said.
Van Eeden said he was fully invested in mining stocks from 1998 to May, when he sold half of the stocks.
"I thought gold prices were overextended. Always hedge your bets," he advised the audience.
The only factor that would cause gold prices to drop is if an over-valuation in the price of base metals forces a selloff of all metals, including gold, van Eeeden said.
"If not for that risk, I'd be 100 percent invested" in mining stocks, he said.
Jonathan Price, Nevada state geologist, said the industry is enjoying its greatest gold boom ever.
The 200 million ounces of gold produced mostly in Nevada since 1981 is more than the 29 million ounces produced during the California Gold Rush and the 95 million ounces produced in various areas of the U.S. from 1895 to 1920, Price said.