Feelings on the price of gold forecast for 2011? Under $1000, same as now, or way higher? ......
If the American economy does not rebound significantly and Spain defaults, as is expected, the price of gold will go through the roof. Confidence around the world is in very short supply and without consumer and investor confidence the world's economies will continue to suffer.
If Governments continue with their policies of fiscal easing (printing money without the backing of any kind of security - gold, earnings etc) then each unit of currency for that country is effectively devalued.
When currency is devalued the amount of value that can be purchased with the currency is lowered (once it is seen to have a lower value).
The amount of specie money (gold, silver) that can be bought with the revalued currency (in absolute terms) is lowered.
One can judge the amount of revaluation of a currency (paper or fiat money) by the new amount of specie than can be purchased with one unit of the paper money.
Gold will increase in cost (the amount of paper money that must be spent to purchase a set amount of the metal) as long as it is understood that paper money is not at an equivalent value.
All this is down to investor sentiment.
If investors are stockpiling gold then the price will increase until Governments begin to redress the situation of specie against fiat money. To do this they must themselves back their currency with enough gold reserves to alleviate any discrepancy.
The latest calculation I have seen shows that the US Dollar is covered by just 4 cents worth of specie (gold) and that was before the latest round of easing (printing of more US Dollars).
Usually I would be concerned when investors all start to pile into the market (herd mentality) but in this case I see no indication from the futures markets that gold (or silver for that matter) has a large downside. The indications for me give a pointer to gold reaching an upper limit (whatever that may be) but will not plummet.
Since silver has not reached it's historic 16:1 ratio with gold, my suggestion is that silver should be purchased. This is due to the fact that silver is used up at a greater rate than gold in industrial processes and that there is probably less silver available to the marketplace than gold.
I wish I had a crystal ball but I'm projecting somewhere in the ball park of $1,800 usd. an oz. over the next 12 months. I would also be looking at Gold priced in the british pound as well.
We're getting to the point that if gold gets any higher, I would be concerned that the world as we know it is coming to an end. I decided to take the guarded optimist route and sold 75% of my gold and silver. I may regret this decision later, but as I see it, if gold reaches near 2000 dollars we'll be under complete global economic collapse. You'll have difficulty trading in your gold for dollars, and besides, dollars would be worthless in such a case. Seeing that only 1% of the population trades gold/silver and recognizes it as tender, don't act surprised if you find youself unable to trade your gold/silver for food, water, bullets, etc. Dealers may outright refuse to sell gold at that listed price in the fear it will go down. That's what happened to silver in the 1980's when it hit, adjusted for inflation, 70 US for a brief period of time. Dealers would only sell that silver for 35 US.
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