I won’t ever predict exactly where I think gold is going to be in the next month, year, or decade. The reason I won’t provide such forecasts is fairly simple — economics isn’t an exact science, and all predictions should be taken with a grain of salt, a calming breath, and step back.
Predictions are serious matters — a wrong prediction can destroy the investments of many people, which is why I’m very cautious about any predictions or forecasts. Below is some information originally published at my oil prices blog.
Price Predictions: Science or an Art?
Don’t trust people who make exact predictions about where the price of anything is headed. $5000 gold? $200 oil? They’re making up crap. Economics isn’t an exact science yet. Ignore opinionated bulls and bears and look for honest skeptics.
Listening to anyone who has any type of exact price prediction is a dangerous habit that can leave you completely ruined. What’s worse is how common exact price predictions are.
Investment websites, economics newsletters, cheesy financial marketers — they’re all rife with exact predictions for the price of oil, the price of gold, the price of silver, and other investments. Let’s talk about why they’re dangerous and how it’s foolish to trust such predictions.
Economics and Price Predictions
One of the biggest myths about economics is that it’s the study of math and money. It’s not. The definition of economics is the study of human behavior, period. That’s why they teach about how people respond to incentives in economics, what motivates people, how people interact, etc. After all, the markets are just the people.
And because the markets are people, economics isn’t and probably won’t ever be an exact science. It’s more of a liberal arts study. People sometimes respond in irrational ways, act on bad info, act with bad intentions, act with good intentions, etc. People are kind of random, in the end.
Of course, we can get general ballpark numbers — we know Jim Rogers believes gold is going to hit $2,000 at some point in the next 5 or so years — but that kind of moderate prediction isn’t exactly detailed, it isn’t exactly on a timed schedule, and is should always be read with a grain of salt.
Price Predictions and Investment Advice
Because of this, predicting how the market is going to exactly react isn’t an exact science, and exact price forecasts are often wrong — and usually don’t see market collapses before it’s way, way too late.
This isn’t to say that predicts about which way in general an asset will head is wrong. But exact price predicts are usually wrong. For example, I’ve predicted on most of my websites just a year ago that I thought commodities (gold, silver, and oil specifically) were going to “explode” in value. But I never made exact price predicts, because it’s not an exact science.
This isn’t to say that forecast services aren’t extremely, extremely valuable — I subscribe to several. But I take the predicts with a heck of a lot of salt, because I know that even the greatest scientific and economic minds are usually off by a heck of a lot.
Stay skeptical — and make sure to click “like” below so we can keep our articles completely free.
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