Gold Group’s John March lays out the chances of hyperinflation and that physical gold is a good way to protect against it. He predicts $1,500 – $1,600 gold by year end.
The IMF predicts that growth in China and India along with other developing countries will be about 7.3 percent this year. This shows an economic re-balancing between the west and the east. Most of the global growth will occur in Asian countries over the next 10 years. Deutche Bank’s Chief Economist for China Ma Jun stated that in the next 10 years the GDP of China could overtake that of the United States.
This increased wealth in the East, and the need for major infrastructural projects in that region, indicate an increased demand for commodities. According to Bank of America-Merrill Lynch executive Diego Parrilla commodities as an asset class look promising. Oil, platinum, copper and gold will extend their rally this year as growth in emerging markets including China and investment demand fuel gains.
The relationship between Gold and the Dollar has quite a lot to do with the believe that Gold may rise. This is because of the money that has been injected into the system as part of various stimulus packages throughout the world. This points to inflation as people’s savings have been diluted by all this new money. Central banks in Asia are buying Gold. Previously Central Banks globally were net sellers of Gold. This change in central banking policy emphasis Gold’s strength right now.
An interesting article on the outlook for gold prices in the next few years that was published by gold-eagle.com counters the arguments made by the gold bears out there.
Here is a quick summary of the pro-gold argument:
Central Banks are now buying gold
Easy to find gold has already been mined
The Population has increased 53% since the last “gold rush” in 1980
The majority of the population increase has ocurred in India and China and these people love to own gold
Mining costs are increasing
Red tape and bureaucracy slow down the opening of new mines
Greenlight hedge fund went from owning GLD (a gold ETF) to owning physical gold
Currency concerns point to gold good investment
Politicians are making a lot of mistakes
Even if you are not as sure about the future of gold. I believe that is a solid prudent investment that everyone should make. Even as a hedge that gives you peace of mind. Buying gold can be justified on several levels.
The Dollar’s rise today has resulted in Gold falling to under $1040 an ounce. This trend was seen across all the precious metals and indeed commodities a whole. The question remains how much is the dollar going to recover it’s losses that have taken place over the last three weeks. A balanced and moderate view needs to be taken when deciding the best time to buy more gold. If prices decline further it may well present a great opportunity to buy. Remember, Gold is still trading over $1,000 an ounce. That’s still very impressive.
