Dollar, Federal Reserve, Trust

Gold to Rally to $1500?

Gold last closed at $1246.20, up close to 200% over the past 5 years and over 10% in 2010. Peter Schiff has estimated that gold could skyrocket to as high as $5000 an ounce! Now others are joining the chorus, even if to a lesser extent. According to Bloomberg, “The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21.”


Eugen Weinberg, the most accurate forecaster in the first quarter, agrees with investor sentiment, saying the following:

“A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.”

He expects gold to rise to $1400 an ounce and a survey of 29 investors and analysts puts their median prediction close to $1500. I’ve always been hesitant about predictions (see The Black Swan by Nassim Taleb) but gold has been a good store of value during times of economic turmoil and is a great hedge against inflation. It’s quite telling indeed that the price of gold rose sharply even while we have been suffering from “deflationary pressures.”

Right now, however the Fed is on record that they will start monetizing debt and already basically doubled the monetary base:

Source: St. Louis Federal Reserve

Velocity is low and many banks aren’t lending, but still, with that kind of monetary expansion, there’s no reason to expect gold prices won’t continue to rise… be it to $1500 or beyond.


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