I am like a Proud Papa when talking about gold, because of my history of good calls with the yellow metal. Back in 2008 when I had just first begun making guest appearances on CNBC, I made a bold call to Mark Haines that gold could go to $1500/ounce.
At the end of 2010, we wrote polished our thesis for the gold trade going forward, and so far going forward it has played out largely according to plan.
We have seen inflation take hold a lot in China and signs it could soon accelerate at home. Problems have continued to recur in Europe with Greece avoiding disaster with a last-minute austerity package, and now Italy looking like the next of the PIIGS nations to need a massive rescue package. Spain is the other nation to run into more serious problems of late, and you just have to wonder how deep the EU and IMF can reach into their pockets when bigger dominoes start falling.
With the ongoing problems in Europe, fear has once again resurfaced a bit in this market and gold has returned as the safe haven of choice. The economic recovery in the US continues to move at a snail’s pace, especially in regards to the jobs and housing markets. The slow growth has now prompted Fed Chairman Ben Bernanke to at least start hinting at another possible round of quantitative easing, which would is highly inflationary. The markets and gold have surged over the past two days based on Big Ben’s testimony, and it’s not out of the question to see the kind of Fed front-running that we saw in the second half of 2010.
The issue that has yet to really rear its ugly head and grab the headlines are state budget crises. Given the nature of our political system, deep benefit cuts and unpopular austerity measures will be difficult to push through amid the jostling to control of Congress and the White House. Many touch choices will need to be made
When silver made a harsh correction earlier this year following a parabolic run, gold actually held in very well, and is now making new all-time highs. As we stated in the blog from last December, I expect the GLD to easily see $160 relatively soon as the factors align to drive it higher, and could see spot gold hitting 2,000 over the course of the next year.
Disclosure: No position