Will gold hit 5000 dollars an ounce?
This is not an expert view on gold price, just one man's opinion, I do not own a crystal ball like some pundits claim to have!
If you are a gold watcher, you would have seen very little real entertainment in the last 30 years, and gold has become a bit boring really.
All that may be about to change with gold hitting the spotlight a little lately with prices approaching viability levels for some miners with higher than average extraction costs.
It is logical that gold has climbed a bit lately, Questions of financial liquidity helped, as did the many wars that frighten currency so much.
What is more interesting is why it is not much more expensive than it is currently.
The US dollar is a long way from out of the woods, yet apart from a government or two buying a few tonnes, demand for the lovely yellow has remained pretty slow.
If you consider the rise in price of gold in the seventies and where it got to, (I will leave you to do the math for your currency's inflation,) here in Australia that amounts to around 3 and a half grand an ounce in today's dough.
If this next round of world financing does not go well, or if the finance has to be obtained under trade duress, then I believe we could see a stronger lift in the price of gold to levels that although seem high, are in keeping with a heavily indebted world.
The enormity of the extended costs of 2 wars, and the coming cost in August to re-settle the American troops returning from Afghanistan along with 10% unemployment and massive existing debt it is not hard to see the possibility of the dollar taking a hiding in the medium term.
Some things are basic. The value of the buck is one of them. How can America attract capital with so many recovering economies already increasing their interest rates as much as 1 percent in a few months. Base rate in places like Australia are already up to 4 percent with retail money selling at 6 percent or more.
China will do what it can to keep America afloat, it needs the market, especially now.
What it can do will be limited by it's own grossly overstated growth being further stifled, and the need to pour trillions of Yuan into infrastructure to employ enough of it's people to avoid an internal social meltdown.
Again primary product producers will still stay on the gravy train, but America is not a big supplier of iron ore bauxite, natural gas, so no wins there to feed this monolithic economy either.
This would leave China with only the interest in America as a market, and currently Americans are not able to keep consuming at the previous rate and that will count with China too.
India may well be able to assist global refinance, but where will it's interest be focused?
I say watch gold. It could hit 5000 an ounce!