This may sound sensationalistic, but I think the odds are very high that, on average, gold producers will sell in the $200 range before this bull market is over. With most of them trading between $20 and $40, the returns could be tremendous. And while the typical junior won't reach the same price level, their percentage returns will be much greater and potentially life-changing, as you're about to see.

The timing of this article may seem incongruous, given the recent weak performance of gold and gold stocks. But that was the identical situation in each of the past manias: both the metal and the equities didn't excel until the frenzy kicked in. The following documentation is actually a fresh reminder of why we think you should hold on to your positions - or start accumulating them, if you haven't already.

So, are my projections based on some fantastical gold price, or a complex formula for gold stock valuations? Nope. I base my projections simply on what gold stocks have done in the past. And to the surprise of many investors, it's a performance they've logged several times, making the following prices very believable if you're bullish on gold.

It comes with a warning, though:

Caution: the following tables may cause excitement, drooling, or the temptation to go all in. Read and invest at your own risk.

You've undoubtedly read about gold's spectacular climb in 1979-'80. And you've likely heard how well gold stocks performed in general. But most researchers haven't identified exact returns from specific companies during this era.

The reason? Digging up hard data prior to the mid 1980s, especially for the junior explorers, is difficult because it hasn't been computerized. So we sent a couple of researchers to the library to view the Wall Street Journal on microfiche. We also relied on Scott Hunter of Haywood Securities; Larry Page, president of the Manex Resource Group; and the dusty archives at the Northern Miner. (This means our tables, while accurate, are not necessarily comprehensive.)

Let's get started...

The Quintessential Bull Market: 1979-1980

The granddaddy of gold bull markets occurred during the 1970s decade, one culminating in an unabashed mania in 1979 and 1980. Gold peaked at $850 an ounce on January 21, 1980, rising 276% from the beginning of 1979. Yes, the price of gold on the last trading day of 1978 was a mere $226 an ounce.

Here's a sampling of gold producers from this era. What you'll notice in addition to the mouthwatering returns is that gold stocks peaked not until nine months after gold.

You'll see there was great variability among the returns of these companies. That's why, even if you believe we're destined for an "all-boats-rise" scenario, you still want to own the better companies.

Today, Barrick is selling for $47.59 (as of November 25). If our mania started now and mimicked the average 289.5% return, ABX would reach $185.36 at its peak. GDX at $54.79 today would hit $213.40.

Keep in mind, though, that our data measure the exact top of each company's price. Most investors, of course, don't sell at the very peak. If we were to able to grab, say, the middle 80% of the climb, that's a return of 231.6%. Barrick would hit $157.80 and GDX $181.68 in that scenario... still tantalizing returns.

And with all due respect to Barrick management, there are gold stocks we're convinced will far outperform the largest gold company in the world in the coming mania.

Here's a sampling of how junior gold stocks performed in the same period, along with the month each peaked.

If you bought a reasonably diversified portfolio of top-performing gold juniors prior to 1979, your initial investment could've grown 23 times in just two years. If you managed to grab 80% of that move, your account balance still would've grown 1,850%.

This means a junior priced at $0.50 today that goes on to become a Mania Phase winner could sell for $12 at the top, or $9.75 at 1,850%. If you own ten juniors, imagine just one of them matching Copper Lake's return.

Here's what returns of this magnitude could mean to you. Let's say you have $10,000 to devote to a portfolio of the best-of-the-best gold juniors. If our mania someday matches the classic 1980 blow-off top, your portfolio could be worth $241,370 at its peak... or about $195,000 if you manage to grab the middle 80%.

This all assumes, of course, that you sell to realize the profit. If you don't take the money and run at some point, you may end up with little more than tears to fill an empty beer mug. Consider this: many junior gold stocks, including some in the above list, dried up and blew away after October 1980. Investors who held to the bitter end not only saw all their gains evaporate but lost their entire investments as well. Keep that in mind, because all bull markets eventually come to an end - even golden ones.

Returns from that era have been written about before. So I can hear some investors saying, "Yeah, but that only happened once."   

Au contraire. Read on...

With fiscal time bombs ticking in both Europe and the United States, the pertinent question for now seems to be which will explode first. For much of the past few months, it looked as if Europe was set to blow.  

But Angela Merkel's refusal to support a Federal Reserve-style bailout of European sovereigns, as well as her recent statement that she had no Hank Paulson-style fiscal bazooka in her handbag, has lowered the heat. In contrast, the utter failure of the Congressional Super Committee in the United States to come up with any shred of success in addressing America's fiscal problems has sparked a renewed realization that America's fuse is dangerously short.  

Chancellor Merkel has been emphatic that European politicians not be given a monetary crutch similar to the one relied on by their American counterparts. Her laudable goal, much derided on the editorial pages of the New York Times, is to defuse Europe's debt bomb with substantive budget reforms and, as a result, to make the euro "the strongest currency in the world." Much has been made of the poorly received auction today of German government bonds, with some saying the lack of demand (which pushed yields on 10-year German bunds past 2% - hardly indicative of panic selling) is evidence of investor unease with Merkel's economic policies. I would argue the opposite: that many investors still think that Merkel is bluffing and that eventually Germany will print and stimulate like everyone else. It is likely for this reason that yields on German debt have increased modestly.

In contrast, the US is crystal clear in its intention to ignore its debt problems. With the failure of the Super Committee this week, it actually became official. American politicians will not, under any circumstances, willingly confront our underlying debt crisis. While the outcome of the Super Committee shouldn't have come as a great surprise, the sheer dysfunction displayed should serve as a wakeup call for those who still harbor any desperate illusions. Some members of Congress, such as John McCain, have even come out against the $1.2 trillion in automatic spending cuts that would go into effect in January 2013. Expect more politicians of both parties to cravenly follow suit.

Over the next decade, the US government expects to spend more than $40 trillion. Even if the $1.2 trillion in automatic cuts are allowed to go through, the amount totals just 3% of the expected outlays. In a masterstroke of hypocritical accounting, $216 billion of these proposed "cuts" merely represent the expected reductions in interest payments that would result from $984 billion of actual cuts. These cuts won't make a noticeable dent in our projected deficits, which, if history can be any guide, will likely rise by much more as economic reality proves far gloomier than government statisticians predict. Finally, the cuts are not cuts in the ordinary sense of the word, where spending is actually reduced. They are cuts in the baseline, which means spending merely increases less than what was previously budgeted.

In the meantime, the prospect of sovereign default in Europe is driving "safe haven" demand for the dollar. So, contrary to the political blame game, Europe's problems are actually providing a temporary boost to America's bubble economy. However, a resolution to the crisis in Europe could reverse those flows. And given the discipline emanating from Berlin, a real solution is not out of the question. If confidence can be restored there, each episodic flight to safety may be less focused on the US dollar. Instead, risk-averse investors may prefer a basket of other, higher-yielding, more fiscally sustainable currencies.