2010-09-18 01:26:00
How High Will Gold Go?
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The equities markets may be lurching along, unsure in which direction to move, but the price of gold is continuing to move in one direction - up.
It seems as though there is a good chance that gold will pass through the $1,300/oz level next week. The spot gold bid briefly moved past the $1,280 mark earlier today, before settling at a price of $1,274.70.
Gold has been on a tear as of late, trading from $1,230 to $1,274 in the past month, from $1,190 to $1,274 in the past two months and from approximately $1,000/oz to $1,274/oz in the past year.
Investors have become increasingly jittery about the prospects of a global economic recovery taking hold over the past 6 months or so, mainly due to the fact that the "economic recovery" in the United States has basically ground to a halt. Gold is a defensive asset, and many investors/funds have been purchasing gold over the past 3-6 months in anticipation of continued economic turmoil.
Sure, gold is currently trading near its all-time highs, but after adjusting for inflation, the precious metal has quite a ways to go before it eclipses its inflation-adjusted high of approximately $2,250 per ounce.
In early 1980 the price of gold surged to an outrageously high price of $850/oz (in 1980 dollars) due to a number of different factors, including:
1. High inflation (inflation in the US was over 13% in 1980)
2. Weak economic activity
3. The invasion of Afghanistan by the Soviet Union
These three things conspired to lift the price of gold to heights that had never seen before.
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As the world continues to nervously contemplate the future direction of the global economy, the price of gold will likely continue to trend higher. Fear is great for the price of gold, and there is plenty of fear throughout the world right now.
How high will gold go? George Soros believes that gold is in a bubble right now, but doesn't deny the fact that it may continue to rise in the short-term.
Many other high profile money managers are still steadfast gold bulls, with some believing the the price of gold could double, triple or even quadruple over the coming years.
How high do you think gold will go?
Filed under: The Economic Meltdown
2 COMMENTS - What Say You?
Comment by Kevin on September 19, 2010 @ 10:07 am
The Bunker brothers were busy trying to corner the silver market too which helped drive silver prices up to $50oz back in 1980. I remember interest rates in Canada going to 21% back then (and real estate prices collapsed) just to slow down inflation and they increased the commodity margin requirements in order to stop excessive speculation in the metal markets and forced margin traders to sell their gold/silver positions due to the new restrictions on margin which helped drive the metal prices down and financially ruined the Bunker brothers. When gold quadruples in a year or doubles within a month and everyone around you is talking about it THEN you know you are in a bubble but not any time sooner. Anyone who pulls up a 10 year chart can see the direction of gold.
John Williams who runs Shadowstats.com and tracks the real inflation and government numbers etc... is expecting hyper inflation to set into the US in the next 6-9 months due to the data he analyzes. He sees gold going to $7600oz.
The price of gold really comes down to how much money the privately owned corporation (AKA "The Federal Reserve" even though it is not Federal and they have no reserves) will continue to print money out of nothing since their printing presses are unlimited (electronic money) and there is only a fixed amount of physical gold in the world (150,000 tonnes). Even Alan Greenspan wrote a book in 1966 about how gold protects peoples assets from bankers robbing them through inflation or creation of more fiat money. Of course he changed his ways once he was invited into the good old boys club.
Gold can't go bankrupt due to mismanagement and a million other things that can go wrong with a company which makes it safer than stocks.
Gold will continue to do its runs which it usually starts in September (now) and goes up for 4-6 months and then consolidates over a year or so before pushing upwards again for the next stage in the bull run.
I remember back in November 2005 that the Federal Reserve published a small 4-6 line article on their website stating that come March 23, 2006 that they would no longer publish their M-3 aggregate due to trying to cut costs and that was the day I jumped into gold with both feet at $460oz. Gold ran to $730oz 8 months later before pulling back.
Bottom line: Physical Gold is real money and not fiat paper/electronic money printed out of thin air by a privately owned corporation owned by 70% European banking dynasties and backed by nothing. In God we trust? YEAH RIGHT!!
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Comment by FTC on September 29, 2010 @ 4:28 pm
Not high enough.
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