Secret Ratio Values Gold at $1641.60 an Ounce

By Ian Wyatt, Big Idea Investor | bsc | Mar 18, 2008 | comment

Just a week ago, one share of Bear Stearns (NYSE:BSC) stock was worth $66 dollars. 6 days ago, that same share of stock would fetch around $55 dollars. On Friday, one of Wall Street?s oldest, most respected names, was worth just $30 share.

You know how the story ends. On Sunday, JP Morgan (NYSE:JPM) announced that it bought Bear Stearns for just $2 a share. Quite a fall from grace for Bear Stearns.

We know that Bear Stearns was undone by its aggressive bets on mortgage backed securities. Still, we can't help but marvel at how quickly the company unraveled.

There's certainly an important lesson here about investment risk. But I think the true moral of the Bear Stearns story is about value.

If Bear Stearns was worth just $2 on Sunday, was it really worth $66 last Wednesday?

And what's the US dollar worth today? More than the paper it's printed on, we hope. But will the full faith and credit of the US government really come to bear on the dollar at a certain price? Or perhaps the ol' sawbuck's only worth what Asian central banks will pay?

How about a gallon of gasoline? Sure, we grumble about paying $3.25 a gallon at the pump. But it sure beats riding a bike to work. At least for me.

Value is a relative thing. I'd probably pay up to $20 a day to get to and from work. That'd put gasoline at better than $10 a gallon.

Over the course of human history, very few assets have managed to be valuable for long. Native Americans once used shells and beads as currency. But I'd bet today, they'd gladly give back the trinkets they traded Manhattan for.

At $15 million, the French seemingly got a better deal for the Louisiana Territory. But Napoleon was hot to launch an attack on England, and abandoned his assets in the New World. Thomas Jefferson took advantage, and doubled the size of the United States for about 3 cents an acre. $3 million in gold was the down payment.

JP Morgan would have been proud.

Land is always worth something. (Beads, shells or pennies ? maybe not so much.) But land?s not very useful as a currency. I doubt anyone ever bellied up to a bar and bought a shot of whiskey for a pocketful of dirt. But a couple nuggets of gold in your pocket would've got you a warm bath and an even warmer companion to enjoy your whiskey with.

Gold's been used as currency for 3500 years. Like real estate, gold's always worth something.

Yesterday, an ounce of gold was worth $978 an ounce. That's down from recent highs above $1000. But my superstar analyst Benson George has uncovered a Secret Valuation Ratio that puts the true value of gold at $1641.60 an ounce.

For the last 60 years, the amount of oil you cold buy with an ounce of gold has remained somewhat constant. But today, that ratio is totally out of whack. As it now stands, gold needs to move 67% higher to restore order to this Secret Valuation Ratio.

I firmly believe the price of gold will rocket $663.60 over the next 12 months. And if history is correct, gold prices will jump even higher. That's usually what happens when this ratio gets out of balance.

Given the unprecedented demand for gold and the never-ending fall of the US dollar, I expect gold will eventually trade for $3000 an ounce.

That might sound ridiculous. But don't forget 1980, when gold hit $850 an ounce. In today's dollars, that's nearly $2,200 an ounce. There's no way around it ? gold prices are going much higher.

I've prepared an urgent, free Special Report to show you exactly why gold's headed to $3000 and ounce. I'll detail gold's Secret Valuation Ratio. And I'll also examine three other forces that will continue to drive the price of gold higher and higher. And to top it all off, I'll show you the 5 safest ways you can profit from gold's inevitable run higher.

This free report is titled Gold Rush 2008: 5 Gold Stocks to Profit from in a Down Market. In these uncertain economic times, it's still possible to safely preserve and grow your wealth.

Please click this secure link to get your copy of Gold Rush 2008: 5 Gold Stocks to Profit from in a Down Market Today.

Warm Regards,

Ian Wyatt
Chief Investment Strategist
Top Stock Insights

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