“$50,000 Gold in 2020″ — Jim Sinclair’s Senior Moment

Jim Sinclair now predicts that gold will be at $50,000 sometime in 2020. This is all over the Web.

With gold at about $1330 an ounce these days, the price would have to multiply by a factor of 38 to reach $50,000.

Let me the be the first to say that this is not going to happen. I say this as a gold bug out of the early 1960′s.

There are far better sources of both profits and income for investors than gold at $50,000 an ounce. Nobody is going to pay you or anyone else $50,000 for your Krugerrand.

If you can take four one-ounce gold coins, sell them for $200,000, pay your income taxes, and buy a debt-free investment house for $150,000 that will generate 10% per annum, why would you hold onto the coins? You would not hold onto the coins if you had 100 of them, or 300 of them. You would sell most of them. The population of the United States is going to go to 400 million people by 2050. These people will have to live somewhere. Why would you hold gold coins, when you could buy a debt free house just by selling four coins? Sit back and collect your rental income for the rest your life, and watch the value of your houses go up.[amazon asin=1494399806&template=*lrc ad (right)]

With housing, you get capital gains tax benefits. With gold bullion, you don’t. You will pay twice the tax rate.

He says that hyperinflation is going to hit the United States before 2021. Not mere inflation. Hyperinflation. Yes, you have heard that before. You heard it in January 1980, when gold was at $840 for one day. Will people be paying 38 times what today’s homes cost? Is the median price going to be $200,000 times 38? Do you really think the typical house will cost $7.6 million? If so, buy investment houses, not gold coins. You can buy homes with owner-financed debt. You can leverage your investment by at least ten to one. The renters will pay off the mortgages. Meanwhile, you can depreciate the homes. You can write off the mortgage interest payments as business expenses.

If hyperinflation is going to raise prices by 38 to one, get some leverage. Gold coins will not give you any leverage.

Mr. Sinclair needs to lie down, put a cool washcloth on his forehead, and take a nap. Senior moments happen to us as we get past age 70. We get over them. Usually.

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