Gold may rise as high as $1,500 next year, 21 percent more than the $1,240 traded at 1:45 p.m. in London, according to the median in a Bloomberg survey of 29 analysts, traders and investors. Dan Brebner, an analyst at Deutsche Bank in London who is the most accurate forecaster so far this year, says the metal may reach $1,550.
Bullion gained 13 percent since January, beating an 8.4 percent return on Treasuries, an 8 percent decline in the MSCI World Index of shares and the 10 percent slump in the S&P GSCI Total Return Index of 24 raw materials.
Investors are concerned the recovery is weakening. Sales of new U.S. homes fell to an all-time low in July, the Commerce Department said Aug. 25. The U.S. economy grew at a 1.6 percent annual rate in the second quarter, less than previously calculated, the department said Aug. 27. U.S. growth will slow to 2.8 percent next year, compared with 3 percent in 2010, according to the median of as many as 69 economists’ forecasts compiled by Bloomberg.
The flight to safety appears to be amping up. I tend to strongly disagree with people who claim that gold is the ultimate asset bubble. Gold only “appears” to rise in value because paper money is loosing value. As the purchasing power of the US dollar continues to decline over the next few years, the price of gold in US dollars will rise. This is something that happens when governments like ours debase the value of our money by printing more and more money to pay for programs that can not be funded by current means.
In short, when the Federal Government wants to create something new, they have to find a way to pay for it. Since the Government has no ability to produce revenue, they try to tax the population to cover the amount needed. During times of Economic hardship, laying increased taxes upon the masses won’t get anyone in government re-elected, so, they turn to the printing press, which temporarily covers the outstanding amount and shifts the burden of payment to a future generation.
The problem with the “printing press” option is that it creates enormous amounts of new money. New money gains it’s value by taking value from the money currently in circulation, resulting in a decrease in value for all money within the economy.
That is what inflation is, the amount of money in circulation increases, while the value of that money decreases. This is why people are running to purchase gold, silver, land, and other hard assets. If you haven’t done the same by now, you should start today. So long as the Federal Reserve exists, and the Federal Government continues it’s ridiculous spending spree, precious metals have only one direction to go over the long term….. up.
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