Where is the gold price headed from here? As we wound down
2011, gold prices slipped to multi-week lows. As prices slipped,
reports again flooded the airwaves extolling the death of the
gold bull market. As the New Year now rolls in, and year-end
profit taking concludes, prices are ticking higher along with the
price of silver, palladium and platinum. I personally think the
death of the gold bull market has been greatly exaggerated.
Perhaps you will agree.
First, I don't believe Central Banks of the world have been
increasing their stockpiles of gold because they expect the price
to go down. Think about it. Those who have the ability to print
money and indeed are likely to be called on to do so, are buying
gold. Let's face it, even a report that a major bank is
considering printing more money can affect the markets.
Conversely, so can a report that says more printed money is not
an option. Yes, this suggests short term manipulation of the
markets is possible. However, that's exactly what it is - short
Incidentally, it also makes better news to report from one
extreme to the other. I recall, when gold hit the $1900 per ounce
level, reports of $5,000 gold made TV headlines. Not two months
later, those reports were replaced with reports of $1200 gold
ahead. It's always curious to me how, regardless of what the
prediction of the day may be, the TV anchors, or their special
guests always seem to be able to make sense of it. Let me ask,
how many times you have heard in the mainstream media that
central banks are buying gold by the hundreds of tonnes. Need I
Secondly, all the metals are moving in unison. It makes no
sense that an anticipation of better economic times or a stronger
dollar would drive
precious metals prices down. If economic recovery really is
in motion, the industrial metals should be moving higher in
anticipation of increased industrial activity and demand for
those metals. It's one thing to say gold has lost its safe haven
status but to the extent that status is lost, it would be because
true economic recovery is underway. In that case, industrial
metals would separate themselves from gold and rise accordingly.
That was not occurring at the end of 2011 and it is not the case
as we launch into the new year.
Finally, geopolitical unrest is reaching a new crescendo. Iran
is just begging for conflict. If they do not follow through with
their threat to close down the Straits, they still flirt with
retaliation for their nuclear activity. Either way the world oil
supply is held hostage and any disruption in the power base in
Iran is sure to bear on the world economy.
I'm often asked, why then has the price of gold dipped to
these current lows? You have to admit, gold has had a great run
and it is hard to maintain that momentum when all the news points
to some kind of recovery. As the saying goes, repeat something
often enough and it becomes truth.
So, as I have said numerous times, if you believe there will
be no more money printing, that we are in economic recovery, that
2012 will see world peace then don't buy into any story that
suggests gold prices will resume their march higher. If you
believe the greatest challenges this country has ever seen still
lie ahead, equip yourself with the means to protect against
failing currencies, inflation and an amount of debt that can
never be repaid. Information is key and it costs nothing to visit
for the latest breaking news on gold, silver and the
Gold has always been the hedge against this kind of
uncertainty and I doubt 5000 years of history will be wiped out
with a few news reports that everything is going to be OK!
Frankly, if gold were half the price it is now it would only be
for the reason that millions more of my friends and neighbors
would have jobs, real estate prices would be in recovery and my
kids would not be stuck with the consequences of repaying a debt
that looks more and more like it will never be repaid.