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Jan

2012

Top 10 gold price predictions for 2012

by Fred Marion

The gold market got a powerful jolt last week when the Federal Reserve announced plans to keep interest rates at historic lows through at least 2014. It was a sign, perhaps, that the gold rally has more than a year’s worth of climbing to do (until the Fed gets serious about combating inflation). The news has helped push gold prices up 10 percent in January alone, and that’s got us wondering what’s in store for the metal in 2012. Let’s take a look then at the Top 10 gold price predictions for 2012:

1) An average price of $1,765 an ounce. A Reuters survey of 45 analysts predicted an average spot gold price of $1,765 an ounce in 2012. That’s 14 percent higher than last year’s average spot price for gold.

2) New all-time high for gold. After getting pressed in an interview with the Washington Post, Puru Saxena, chief executive officer of Puru Saxena Wealth Management, didn’t name a price target for gold, but he did say: “My best guess is the price of gold could reach a new high.”

3) $2,300 an ounce. That prediction comes from Peter Schiff, a former U.S. senatorial candidate from Connecticut. He believes 2012 will be the year the dollar finally starts to “fizzle” out (per ETFDailyNews). “We’re a long way from a blow-off top that you would get at the end of a bubble,” Schiff said in the interview. “We might eventually get there, but we’re years away and thousands of dollars an ounce away.”

4) $1,845 an ounce. Global banking giant Morgan Stanley revised their gold price predictions lower on Jan. 17. They believe gold will average $1,845 an ounce in 2012.

5) $1,681 an ounce. Investment bank Goldman Sachs was more bullish than Morgan Stanley. On Jan. 9, they were predicting gold would hit a new record of $1,940 an ounce in 2012 (per Bloomberg). Two weeks later, they were revising that figure down to $1,681 an ounce in 2012.

6) $1,892 an ounce. Barclays Capital believes the yellow metal will surge 21 percent on the year. That said, they also believe the gold price could go even higher by Q3 2012: “Gold is likely to reach a new all-time record high above $2,000 per ounce during the third quarter of 2012.” (per IBT).

7) $1,450-$1,750 an ounce. Jeffrey Wright, senior research analyst at Global Hunter Securities, believes gold will remain range bound for the year between $1,450 and $1,750 an ounce (per NuWireInvestor). He echoes many other analysts, though, in arguing that we will likely see a sprint north of $2,000 an ounce in 2012 at some point during the year.

8) $1,000 an ounce. The bulls are tempered by Jon Nadler, a senior analyst at Kitco.com. Nadler argues gold will hit $1,000 an ounce before it hits $2,000 an ounce. “The question will remain for 2012, to what extent will investment demand be able to remain the principle driver and continue to attract interest from speculators and investors,” Nadler told TheStreet.

9) $3,000 an ounce. John Ing of Maison Placements Canada Inc. expects to see gold at $3,000 an ounce in 2012. “There’s just a lack of compelling investment alternatives,” Ing writes.

10) A Long-Term Prediction: $3,600 an ounce. Frank Holmes, CEO of U.S. Global Investors, believes gold prices could double in the next five years to $3,600 an ounce (per NuWireInvestor). “Does anyone really believe in the long term strength of the U.S. dollar … We’re just going to have to live with this volatility for another 12 months,” Holmes told NuWire.

The biggest beneficiary of high gold prices in 2012 could be gold and silver mining stocks. See which companies we think our poised for success in our BRAND NEW book: the Top 500 gold and silver mining stocks.

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Tags: 2012 gold price predictions, gold price forecast, gold price predictions, inflation
Posted in gold, gold stocks, precious metals | No Comments »

Oct

2011

$10,000 gold doesn’t sound that crazy anymore

by Fred Mason

I’ve been listening to The Financial Sense Newshour with Jim Puplava for about two years now. The host is unabashed about his bullishness on gold, but he backs it with logical arguments, and it’s been difficult to argue with his stance that gold is going to keep going up until we see some new form of non-fiat currency.

It wasn’t until this week, though, that I heard Mr. Puplava actually give a price target on the metal:

“We aren’t even close to where I see the price of gold and silver going. We’re probably in the second phase of this bull market. Wait until we get to the third phase of this bull market where I think you’re going to see prices closer to $10,000. I know people probably think I’m nuts saying that, but I can make all kinds of fundamental reasons why we think that’s where we’re eventually going to end up.”

Mr. Puplava attributes the rise in gold to one thing: money-printing at, not just the Federal Reserve, but by central banks and governments around the world.

“The debt issue, as Reinhart and Rogoff have told us in This Time Is Different, it takes about 10 years to work those things off.

“We’re only four years into a 10-year debt cycle work-off. So we have another six years to go, and does anyone believe that governments are going to stop printing money? I mean just take a look at what they’re talking about bailing out, back-stopping, quantitative easing, they have all kinds of fancy names for it, but we all know what happens when they do this kind of thing.”

It turns out Jim Puplava’s not the only one who thinks we could see gold at $10,000 an ounce. Nick Barisheff (the CEO of Bullion Management Group Inc.) is actually working on a book titled “$10,000 Gold – Why it will get there sooner than you may expect.”

“Unless current monetary policy is drastically changed, it will almost certainly rise to $10,000 an ounce and beyond,” Barisheff writes (per ResourceInvestor).

He believes three facts are contributing to gold’s ongoing march toward five digits:

The loss of purchasing power of global currencies
The inflationary effects of money creation
Irreversible trends (an aging population, peak oil and outsourcing) will continue to cause gold to rise

Barisheff goes onto point out what I think most outsiders fail to miss when they’re thinking about gold: it doesn’t rise in value. It’s only going up in price because the value of our dollars, euros and yen are falling.

And, if you fall in their camp, you’ll probably come to the same conclusion they have: the fiat currency system that President Nixon implemented in 1971 is on the verge of collapse. And until we get a new currency, gold, silver and other hard assets will be the only vehicles we’ll have to protect the assets we’ve a worked a lifetime to accumulate.

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Tags: gold price forecast, gold price predictions, Gold Price Target
Posted in gold, gold stocks, mining stocks, precious metals | No Comments »

Sep

2011

Revising gold price targets for 2012 after the plunge

by Fred Mason

It’s difficult to downplay the severity of the sell-off in gold. Just a week ago, the yellow metal closed at $1,805 an ounce. Since then, it’s fallen as low as $1,540 – a loss of 14 percent. Silver prices have performed even more dismally dropping 35 percent from a peak of $40 an ounce.

After the sell-off, gold is still up 15 percent on the year while silver’s just about flat. The scary part is (as Eric Fry at Daily Reckoning points out), U.S. Treasuries have actually out-performed precious metals! The 20+ Year Treasury Bond ETF (NYSE:TLT), for instance, is up nearly 25 percent since Jan. 1.

“That’s right,” Fry writes, “the debt securities of the now-AA-rated and heavily indebted US government remain the safest safe haven around.”

That’s a sign that investors are losing faith that the recovery we’ve been promised – despite the near-zero interest rates and the $2.3 trillion the U.S. government has pumped into the economy since 2008 – isn’t coming.

Fears of a 2008-style global financial meltdown feel almost palpable. In the words of Nouriel Roubini, we’re facing “unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.”

It’s hard to stand by your investments when you hear economists telling you to stock up on food and make sure you have access to an isolated safe house. The moves in gold prices have even hardened gold bugs wondering whether or not they should stick with the metal.

And no one seems to know for sure where prices are going to go in the near-term. Daily Reckoning’s founder Bill Bonner sees the potential for gold to tumble as low as $1,000. Momentum traders see gold prices touching $1,517 an ounce and silver hitting $22.45.

“Following this rebound (in gold prices), which I expect to get underway this week, there will be a longer slowdown,” GloomBoomDoom analyst Marc Faber told CNBC Tuesday. He says the metal could fall as low as $1,100 an ounce.

Famed commodities trader Jim Rogers seems to concur. “I have no idea what is going to happen this year. I doubt if it will go to $2000 an ounce in 2011, it is more likely to have a correction which will last for several weeks, several months,” he told India’s Economic Times.

Despite their dire warnings about gold prices in the near-term, though, all of the traders mentioned above are unanimous in arguing that this is just a temporary set-back for precious metals.

“Silver has been one of your favourites, but that is down 24% in the past week,” the Economic Times asked Rogers. “Are you still buying?”

“Not yet,” Rogers replied, “but if silver continues to go down as we have discussed before, I will buy more silver too. Do not sell your silver, do not sell your gold unless you are a short-term trader, but anybody who is in this for a long term, silver and gold will both go much higher over the next few years.”

While the pros haven’t started down-grading their gold price targets for 2012 yet, they’re certainly not saying we’re going to hit $2,500 an ounce anytime soon. One ominous research fact points that it could be a long time before we even see gold at $1,800 an ounce again: The gold market has only dropped 20 percent peak-to-trough twice in the past 10 years (per the Financial Times). It happened once in 2006 and once in 2008. In both instances, it took about 18 months for prices to re-touch their highs.

We’ll eventually see gold at $2,000 an ounce (reference my post 10 reasons why we’ll see gold over $2,000 an ounce). These dips are painful, but they’re definitely buying opportunities for patient and disciplined investors.

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Tags: gold price, gold price forecast, gold price predictions, Gold Price Target, silver price forecast
Posted in gold, gold stocks, mining stocks, precious metals, silver stocks | No Comments »

Sep

2011

10 reasons why we’ll see gold over $2,000 an ounce

by Fred Mason

The burden of debt is large. While consumers have cut back on spending since the start of the financial crisis, governments have refused to do the same. It’s looking more and more like the government’s only way out of debt is through substantial and sustained money printing. And that’s fueling what UBS has dubbed an “explosive cocktail” for gold prices. Grumblings of a speculative bubble aside, I think we’re a long way from a top in the gold markets. Here are 10 reasons why:

1) Gold prices mirror the expansion of the monetary base. The image to the left shows the startling correlation between the expansion of the monetary base and the rise in the price of gold. Since the supply of gold remains relatively stable, it acts as a barometer for the purchasing power of the dollar. That means a rise in the price of gold isn’t strictly an indication of increased demand, but also an indication that the dollar just can’t buy as much as it did 10 years ago.

2) QE3. After the end of QE2 in June, much of the world’s wondering what the Federal Reserve’s next round of quantitative easing will bring. Chairman Ben Bernanke made sure to point out that he’s got a “range of tools that could be used to provide additional monetary stimulus” after the Jackson Hole symposium closed late last month. More quantitative easing means greater expansion of the monetary base, and that means higher gold prices.

3) Rock-bottom interest rates. The Fed’s also went on the record saying that the Federal Funds rate will be held near zero for at least another two years. By giving banks access to cheap cash, the Fed hopes to encourage lending, but there’s also a nasty side effect: a weak dollar. No one wants to hold the greenback in a low-interest environment. That pushes investors out of CDs and money market accounts and into riskier assets like stocks and inflation hedges like gold.

4) A brand new jobs package. Tax cuts in President Obama’s proposed $447 billion jobs plan have the potential to significantly boost consumer spending (which accounts for two-thirds of the national economy). Obama argues that the plan shouldn’t cost the government any money, but it’s yet to be seen how such a large decrease in Federal tax receipts will be covered. More than likely, the costs will be deferred, which will increase the strain on the Federal budget and dampen the prospects that the country can organically grow its way out of stagnation.

5) Keeping up with inflation. The government currently calculates the inflation rate at 3.6 percent. However, if you calculate that same rate using the methodologies in place in 1980, the inflation rate would actually be closer to 11 percent. Smart money knows that, and they’re moving into gold as a way to hedge against that inflation. So long as inflation remains high, so too will gold prices.

6) We’re not the only ones fighting inflation. As I wrote recently in a post titled “How to invest in the Swiss franc,” inflation has become a global problem. It’s not just the dollar that’s sinking, it’s the euro, the yuan and the pound. When currencies destabilize on a global scale, there is no safe place to stash your wealth outside of hard assets. That’s what makes the current market so worrisome. The run-up in gold prices in the early 1980s was largely a U.S. problem. This time, it’s gone global.

7) A niche market. Gold’s record-breaking string of price increases has garnered a lot of attention in the press. That exposure tends to make people think that everyone and their neighbor has invested in the metal. Eric Sprott of Sprott Asset Management (which happens to manage the Sprott Physical Gold Trust – NYSE:PHYS) argues that there’s a whole lot of investment potential left for the yellow metal. According to his numbers, just .75 percent of all financial assets are currently invested in gold. When a larger chunk of the public starts investing in the metal, prices could spike much higher, much faster.

8) Central banks are still buying precious metals. Last year was the first time in 20 years that central banks around the world became net buyers of gold. That trend is continuing in 2011 despite record prices. Just this week we learned Kazakhstan plans to buy all of that country’s gold production through 2014 (a quantity that could approach 100 tons). Even the Eurozone’s Central Banks are getting in on the action as they became net buyers of gold in June. That’s the first time that’s happened since the inception of the Euro.

9) A recession appears imminent. Evidence that we’re headed toward a recession seems to mount every day. The government reported zero job growth in August, consumer confidence fell to its second-lowest level of the year last week and – most troubling of all – bond prices are edging up as investors grow increasingly risk-adverse. Should the economy take a decided turn toward negative GDP growth, another financial rescue package seems inevitable. More government spending means a much weaker dollar (and much higher gold prices).

10) We haven’t seen a true bubble yet. The gold market has shown signs of overheating in recent weeks. The Comex has raised margin requirements twice and spot prices for the yellow metal have seesawed in high-volume trading. But the overall trend is intact. We’re in the midst of the eleventh year of the bull market in gold. There hasn’t been a blow-off top yet, and – until that happens – count me among the gold bugs.

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Tags: gold price, gold price forecast, gold price predictions
Posted in commodities, gold, gold stocks, mining stocks, precious metals | No Comments »

Sep

2011

When will we see silver prices at $50 oz. again? Sooner than you might think…

by Fred Mason

With gold hovering just 5 percent off its all-time record high, silver’s been quietly trading in the shadows some 20 percent away from its all-time record high. The white metal appears to be gaining momentum, though, after a precipitous price collapse in May.

This spring’s silver price collapse followed a surge in silver prices to a brand new nominal record high around $50 an ounce. As soon as the white metal took out that milestone, the selling started and it didn’t stop until silver prices had shed more than $18 an ounce. That was good for a 36 percent plunge in eight days!

Since then, the metal’s been in consolidation mode, and most investors have focused on silver’s yellow cousin gold. Gold’s spent the past two-and-a-half months on an absolute tear rising from $1,500 an ounce on June 27 to just shy of $1,900 an ounce in recent trading. That’s a gain of more than 26 percent.

The CME has taken note of the volatility in gold prices and raised margin requirements for gold futures trading on the Comex. If you’ll recall, the CME starting doing the same thing when silver prices collapsed this spring.

There’s lots for investors to be nervous about, and that’s pushed them into precious metals. One of the more interesting facets of investing in gold and silver, though, is watching how investor sentiment shifts from one metal to the other then back again.

Right before silver prices collapsed earlier this year, I wrote a post suggesting it was time for investors to switch from silver to gold. Now, it’s looking like it might be time to do the opposite.

As of this writing, the silver:gold ratio stands at 44:1. This spring it fell as low at 30:1, and Eric Sprott was calling for a ratio as low as 10:1. The historical average rests somewhere around 65:1, but I don’t think we’re going to get that high for several reasons:

1) The silver price collapse was partly based on psychology. When silver broker its all-time record nominal high, everyone and their cousin felt like it was time to take profits off the table. Once the big fish started doing that, smaller traders panicked and the bottom fell out on prices. The good news is this: that $50 an ounce psychological barrier has been wiped out. Where we go from here is anyone’s guess.

2) 25+ percent in a month. When silver prices bubbled up in April, the cost of the metal rose 30 percent in just over a month. In recent trading gold shot up more than 25 percent in roughly the same time span. A gain of 25 percent in a month is too good to be true for institutional investors. They’ve got to lock in those gains, even it means taking some profits off the table.

3) Frothy futures. The easiest and most obvious sign that a market’s getting frothy is when an exchange raises margin requirements on trading for a particular commodity. As I noted above, we saw that happen to silver in the spring, and we’re seeing it happen to gold right now. The CME Group has a vested interest in protecting itself from losses. When it raises margin requirements, it does so because it sees the writing on the wall: the market’s getting too frothy to safely lend cash to metals speculators.

For me, gold’s looking frothy right now, and silver appears poised to go higher; perhaps even pushing through that $50 an ounce barrier again.

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Tags: CME Group, gold price forecast, gold price predictions, silver price forecast, silver price predictions
Posted in commodities, gold, gold stocks, mining stocks, precious metals, silver coins, silver stocks | No Comments »

Aug

2011

Rally in gold prices could still have legs

by Fred Mason

In case you haven’t noticed, the gold market is starting to feel frothy. Over the past month, the SPDR Gold Trust ETF (NYSE:GLD) has risen more than 18 percent while the Dow Jones Industrial Average has tumbled 14 percent.

In a sign of the times, the SPDR Gold Trust actually surpassed the SPDR S&P 500 ETF (NYSE:SPY) to become the world’s largest ETF yesterday (per USAToday). GLD’s now holding some $78 billion in gold in a London vault, while SPY’s holding $77 billion in paper assets.

Gold bugs have to be getting jittery, even as they watch the value of their favorite commodity scream higher. Why? Gold just might be going parabolic, and anything that goes parabolic is doomed for a collapse (no matter how short-lived).

The same thing happened six months ago in the silver market when silver prices rocketed up more than 30 percent from roughly the end of April to the end of May. A series of new silver margin requirements from the CME was widely blamed as causing silver prices to crash.

Now, investors are starting to look at their watches and guess when the same thing’s going to happen to gold. I’m not ready to be a bear yet, though, and here are three reasons why:

1) Seduced by silver prices. I was thinking gold prices were getting over-heated until I look at the chart for the iShares Silver Trust ETF (NYSE:SLV). In April, the run-up in silver prices made gold’s current spike look paltry. In the span of 30 days, silver shot up 30 percent.

By contrast, gold has risen a mere 18 percent over the past month. If bullion is indeed going parabolic, we could be right in the middle of the most powerful part of the upward thrust. We’ve got to be careful, though. Silver more than made up for its rise by giving up all its gains in five short days. That’s a plunge of 6 percent per day!

2) Margin calls anyone? The CME took the brunt of the blame for cooling the silver market after issuing a series of vicious margin hikes when the market got overheated. During a nine-day span at the end of April, CME raised silver margins by 84 percent (per the Wall Street Journal). Two weeks ago, they started in on the margin requirements for gold raising them 22 percent on Aug. 11. CME also hinted more hikes could be imminent for gold, but still, we’re a long way from the 84 percent hike we saw for gold’s white cousin.

3) Timing is everything. Gold prices will likely remain strong through the end of the week as investors await an announcement from Federal Reserve Chairman Ben Bernanke. He’s hashing over ideas with some of the world’s most powerful bankers at the annual symposium in Jackson Hole, Wyoming, right now, and he’ll make some sort of announcement on Friday morning.

Last year’s gathering brought us QEII, of course, and some are betting there’s going to be even more quantitative easing on the horizon as the banking elite look for ways to keep the ship afloat. If that happens, expect lots of fireworks in the financial markets. I’m just not sure if it’s going to be good for gold, but I know better than to argue with a trend until its broken. Friday might be the breaking point, but I’m at least bullish until then. And if gold prices do indeed fall, I’ll look for ways to add more to my portfolio in the rocky months to come.

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Tags: CME Group, GLD, gold price forecast, gold price predictions, silver price forecast, silver price predictions, SLV, SPY
Posted in ETFs, gold, gold stocks, precious metals, private companies, ProShares, silver coins, silver stocks | No Comments »

Aug

2011

Insane gold and silver price predictions for 2011

by Fred Mason

The arguments for investing in gold and silver grow louder every day. While the official Consumer Price Index pegs the inflation rate at 3.56 percent, there’s evidence it’s actually more than three times as high. John Williams at ShadowStats.com calculates the inflation rate using the methodology in place in 1980. According to his numbers, the CPI is actually around 11 percent.

That’s a harrowing figure considering that the average money market account currently pays 0.27 percent in interest (per Money-Rates.com). That situation has produced an environment where no one’s quite sure how high silver and gold prices can go (not that a lot of market analysts, writers and bloggers aren’t trying to puzzle out the answer).

Insane silver price predictions

Jason Hommel at SilverStockReport.com has a long-term price target of $500 an ounce on silver.

“Silver has gone up, now, from $4.15/oz. in 2003 to $40.87/oz. this week in the fall of 2011. Silver is going up by 31%, on average, per year, over the last 8.5 years,” Hommel writes. “Silver will likely continue to go up by 30% per year, or more, for at least the next decade, until silver hits about $500/oz.”

His logic? Currency creation is growing at 13 percent a year, and that leaves investors with few alternatives for protecting their capital. On top of that, the silver market is so small, Hommel argues, that even if 1 percent of U.S. money flowed into silver, the white metal could quickly spike to $600 an ounce.

Insane gold price predictions

Mike Maloney, the founder of GoldSilver.com, has made one of the most aggressive gold price predictions I’ve seen: $15,000 to $20,000 an ounce.

After getting approached by Rich Dad, Poor Dad author Robert Kiyosaki, Maloney spent two-and-a-half years writing his Guide to Investing in Gold and Silver. The research process brought him to a startling realization, he says: the current bull market in precious metals is actually the death knell of fiat currencies. And it’s not just the U.S. dollar that’s doomed, he says. It’s a global breakdown of the monetary system, and there’s nowhere else investors will be able to turn that gold and silver.

“I really couldn’t care less about gold and silver,” he says. “I don’t want gold and silver. It’s just in its cycle right now. It’s a stupid lump of metal that doesn’t have cash flow or spin off dividend yields. So I don’t want gold and silver. It’s just that right now, I don’t want anything else.”

And that’s the same conclusion he’s convinced more and more Americans will make in the years to come.

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Tags: gold price forecast, gold price predictions, Gold Prices, silver price, silver price forecast, silver price predictions
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Aug

2011

Gold prices could dip in near-term as profit-takers move in

by Fred Mason

The price of gold bullion has been in a powerful uptrend rising from $1,600 to $1,800 an ounce in the course of a month. That was good for more than a 10 percent gain in 30 days, and that led to what I expect will continue to be short-term selling as investors lock in profits.

FastMarkets research analyst James Moore told TheStreet that gold prices could fall as low as $1,680 before consolidating and resuming the uptrend.

Gold hit an all-time record high of $1,817 an ounce last week as investors digested bad news. The U.S. lost its AAA credit rating, unemployment numbers got revised upward and consumer spending dipped.

The market did get some good news on Thursday, though, that helped alleviate smoldering fears of a double dip recession: jobless claims fell to a four-month low (per Reuters).

Fred’s best guess: The dip in demand for gold looks like an excellent buying opportunity, particularly if prices fall near $1,700 an ounce. I’m just not convinced that we’re out of the water yet.

The debate over the debt ceiling gave us a glimpse of just how bad the nation’s debt problem has become, and I’m convinced that we’re overly-optimistic on the job market.

Earlier today, The Atlantic posted an excellent chart showing that the unemployment rate is actually closer to 12.5 percent – not the 9.1 percent the government’s touting. Too many people have given up looking for a job altogether.

Consider this: over the past 60 years, the official U.S. unemployment rate has only hit 9 percent or higher for 43 months. Twenty-four of those 43 months have occurred since Obama took office. The economy’s in a dark place, and the debt crisis has taken a lot of ammo out of the government’s gun.

That’s not to say the U.S. is the only economy around the world that’s hurting. It’s a global problem, and it’s one that’s hitting currencies the hardest. The best way I’ve heard it described so far is this: We’re in a bear market for currencies.

Don’t buy that? Consider the recent news that the Swiss government’s considering pegging the value of its currency to the Euro! When the unflappable Swiss are considering inflation, the global economic train has jumped the rails.

And what’s bad for currencies is good for precious metals. Count me in the bullish camp for gold. Not because I love precious metals, but rather because I’m scared of the future for the dollar.

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Tags: gold price, gold price forecast, gold price predictions
Posted in gold, precious metals | 1 Comment »

Aug

2011

The latest gold price forecast for 2011? $2,500 an ounce, says JPMorgan

by Fred Mason

There’s blood in the streets and that has a lot of investors trading their greenbacks for gold. The yellow metal surged through $1,700 an ounce yesterday to hit a new all-time high of $1,728.

We could be just getting started. Case in point: JP Morgan has raised its gold price target to $2,500 an ounce. Two analysts at the bank – Colin Fenton and Jonah Waxman – issued a new note to clients yesterday. In it, they argued the downgrade of U.S. debts will force markets lower.

“Before the downgrade, our view was that gold could average $1,800 per ounce by year end. This view will likely now prove to be too conservative,” they wrote, according to Reuters.

JP Morgan isn’t alone, either. Professor Charles Nenner of the Charles Nenner Research Center made the same proclamation on Breakout yesterday without giving a time-frame for his prediction.

“There’s an interesting situation that gold doesn’t seem to be bothered much by short-term cycles going up and and down,” he said yesterday. “Silver is but gold is not… I wouldn’t say it goes right up to two-and-a-half thousand from this level, but that’s our end goal.”

Conditions are ripe for surging gold prices. The CBOE’s Volatility index or so-called “fear gauge” rocketed up 50 percent yesterday. That’s the biggest one-day percentage gain for the index in more than four years, and it can’t help but remind investors of the harrowing days during the winter of 2009.

Interestingly, gold is the last of the major commodities that isn’t trading at or near all-time inflation-adjusted highs. $2,500 gold would put us near the 1980 peak for the metal (when we factor in inflation). And that makes JPMorgan’s predictions feel all the more likely – particularly with unofficial inflation numbers hovering over 10 percent.

If we do hit $2,500 gold by the end of the year, the metal will have shot up 44 percent from here and nearly 80 percent on the year. Not bad, considering most money market accounts are yielding just 0.28 percent!

WHAT’S THE POINT? Why invest in gold?	SILVER SHEEN Three triggers that could push silver over $50 ounce
CALLING THE BOTTOM? How far down will the stock market crash go?	THE FORGOTTEN METAL Silver prices in August 2011 look to keep rising
A NEW STANDARD Not enough gold in the world to return to a gold standard, Bernanke says	BYE-BYE DEBT How to improve your credit score in six months

Tags: gold price forecast, gold price predictions
Posted in commodities, economy, gold, gold stocks, precious metals | 2 Comments »

May

2011

3 reasons to move from silver into gold

by Fred Mason

The manic rise and fall in silver prices over the past few months has a lot of precious metals investors re-assessing their holdings. In the near-term, it looks like gold bugs have the upper hand. Here are three reasons why the yellow metal will likely out-perform silver in the months to come:

1) Slow and steady wins the race. The fundamental case for gold and silver hasn’t changed, but investor perception has. Whatever the cause of silver’s violent 30 percent plunge, the aftershocks of that move will likely continue for several months. Meanwhile, gold’s proven that its support won’t be knocked out so easily. Over the past month, the iShares Silver Trust ETF (NYSE:SLV) has shed nearly 18 percent of its value. The SPDR Gold Trust ETF (NYSE:GLD) has actually appreciated 0.4 percent during the same time span. That shows unflappable support for the yellow metal even as panic seemed to set in for commodities across the board. When the muck truly hits the fan, there’s nowhere safer than gold.

2) A ratio gone mad. There’s been a lot of speculation about the gold:silver ratio of late. Silver bulls like Eric Sprott of Sprott Asset Management – which manages the Sprott Physical Silver Trust ETV (NYSE:PSLV) and the Sprott Physical Gold Trust (NYSE:PHYS) – have been calling for titanic shifts in the ratio. Sprott’s actually argued that the gold:silver ratio could fall as low as 10:1 (meaning gold would cost just 10 times as much as silver). If that were the case today and gold stayed at $1,491 an ounce, we’d be looking at silver prices around $150 an ounce. Perhaps such a move will be possible over the course of several years, but don’t expect it over the next few months. Since the 1980s, the gold:silver ratio’s been closer to 60:1, which means $25 silver is just as likely as $150 silver (in fact, it’s probably MORE likely). In the words of Dave Kansas at the Wall Street Journal: “It’s more likely that the ratio will revert to modern-era norms rather than race back to the Napoleonic era.”

3) Silver ETFs push down prices. One of the most powerful drivers of silver prices today comes from physical silver ETFs. These stock market vehicles use the cash they get from issuing new shares to buy physical silver. Conversely, when the price of silver falls, ETFs like the SLV must liquidate their physical silver holdings to buy back shares. When the market’s trending up, the SLV can accelerate the rise in silver prices. During extreme silver sell-offs, SLVs decline floods the silver market with excess supply.

“On May 4th as silver plunged below $40, SLV experienced such heavy differential selling pressure that it was forced to liquidate 4.8% of its holdings in a single trading day!” writes Adam Hamilton and Scott Wright of the Australian investing site, TheBull. “This was 16.8 (million) ounces of physical silver that hit the markets!” That’s an enormous amount of silver. Hamilton and Wright point out that it’s 60 percent of Silver Wheaton Corp.’s (NYSE:SLW) silver output for an entire year, and it hit the market in 6.5 hours!

Gold’s stability in the face of panic selling in the silver market is evidence that gold holders have the stronger hand. More selling in the silver space, though, could be on the slate as the gold:silver ratio moves back toward reasonable levels. The ratio hasn’t fallen as low as it did last month in 30 years, after all. Interpret that how you may, but I see it as evidence of an anomaly that’s in the process of correcting.

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