In the long run developments in the financial markets and around the world seem to conspire to whip up a perfect storm for the gold price, taking it up towards $2,000 and further. That new upleg, however, could very well start from a much lower level than now. There are quite a few developments that could easily send the gold price lower in the coming months. Is $1,200 gold in the cards? Words: 774
So says Edin Mujagic (http://www.ecrresearch.com/) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below, where necessary, for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Mujagic goes on to say:
Is a Tighter Monetary Policy Coming?
Although the Fed Board is at odds now whether or not to tighten monetary policy, it is quite conceivable that the Fed will be forced to follow that route when inflation keeps climbing. Keeping the monetary policy at the current ultra-loose stance with inflation increasing much further would risk an outright dollar crisis with inflation getting out of control and much higher long term interest rates, which in turn would push the US government towards bankruptcy…
Will We Have a Near-term Buying Opportunity?[The above] factors are gold-negative [and,] combined with the fall in stock prices that we expect as well, could send the gold price significantly lower – temporarily. [That being said, such an outcome] would present a nice buying opportunity as gold is destined to reach new highs in the years to come. Note that the current price (corrected for inflation) is not the highest price it ever soared to. In nominal terms this will only be the case if gold hits $2,200.
7 Reasons Why Gold is Destined to Achieve New Highs
- Emerging countries like China, Russia, and India have been buying a lot of gold for quite some time (via central banks and sovereign investment funds). The reason is that they wish to diversify their currency reserves and prepare for a future dollar crisis triggered by high and rising indebtedness in the US and the Fed’s very loose monetary policy.
- After three decades of low and easing inflation the trend may finally have reversed. Progressively more investors fear higher inflation or even the occasional bout of hyperinflation in the future.
- There are fears that the public finances in the West could eventually derail completely. If so, there will be even more political pressure on western central banks to monetize the budget deficits. Under such conditions gold is traditionally seen as an excellent hedge.
- Gold relishes a deteriorating geopolitical situation, which we expect in the coming years. If only because the rise of China means that this country will flex its economical, military, and political muscles on the global stage. This could soon lead to conflicts with the other star player, the US (for example about Taiwan).
- Unrest in the Arab region (and elsewhere) may well be a harbinger of things to come. Not necessarily because of an immediate escalation (should the latter take place gold will undoubtedly soar further). Following the turmoil new regimes will take power, often after long periods of dictatorship. There is no telling how stable those governments will turn out to be – or how democratic. This carries the risk of new and violent turbulence… In response, the price is bound to soar up and away.
- A dollar crisis at some future stage cannot be ruled out whereas the other major global currency (the euro) is fighting for its very survival. Uncertainty on the foreign-exchange markets is good news for gold.
- As demand rises – which is highly likely – what about supply?…These days, new gold supplies are a rarity. It is possible to extract gold from unorthodox sources such as seawater but these techniques are expensive and will only be applied once the gold price has become a lot higher.)
[Yes, gold could well drop to as low as $1,200 – short term – but,] on the wings of the above developments, gold is destined to reach record heights in the long run.