Noted Goldbug Interviewed By TheStreet.com; Predicts $8000 Gold

That goldbug is James Turk, and his argument doesn't directly hinge upon the standard inflationary-collapse scenario. He notes that, in the 1930s and 1970s, gold peaked at a price per ounce equal to the point value of the Dow. If it's assumed that the Dow's currently in a holding pattern like that of 1966-82, then US$8000 gold is possible because the "cross" would occur at about that level. It did so at 800ish in early 1980. He gets $8000 by multiplying 800 by 10; he estimates that the 8000 level will be reached by about 2015.

It's a nice scenario, but techncial scenarios of this sort can be played in more than one way. Gold bottomed at about $100 in August 1976 [h/t] after rocketing up to about $200 in 1974. The low for gold this cycle, coming during the financial crisis in 2008, was slightly more than $700. There's a difference right there. In the 1973-4 stock-market debacle, gold shot up. In the 2007-09 one, gold didn't.

Putting that difference aside, and assuming that gold's present run will track 1976-1980, we get an indicated price of almost $6000 for gold - 8.5*$700 - and the peak should come in 2012. After which, gold will plummet down to about a third of peak value; it did so during the Volcker disinflation. A two-thirds drop from that hypothetical level gives $2000 as the bottom.

Both of these scenarios are highly bullish, but note how they clash with each other.

There's also another trouble factor with any such comparison: today is quite different from yesteryear. Back in '73, the U.S. had outright double-digit inflation. In 2008, there was anything but. Even Shadowstats' alternate measurement of inflation collapsed this past year [from double-digit levels, I should add.] From this angle, any bull market in gold at all is surprising.

On the other hand, the U.S. Federal Reserve has expanded the monetary base in an unprecedented way, and the U.S. Treasury is groaning under an unprecedented peacetime budget deficit. Despite all the talk of deflationary collapse of the money multipliers, the M1 money supply is still growing at a fast clip (even if M2 isn't.) Also, last year's credit crisis was far more severe than any downturn-associated crisis in 1973-4 - as has been the monetary and fiscal response to it.

The difference between now and then make any comparison problematic. That said, I might as well throw out a third one: it comes from Ronald Rosen, the same source I used for gold's 1970s bottom above. He compares 2008 gold to 1978 gold, which would imply a huge bull run ending in collapse as of late 2010 or early 2011.