Gold Will Hit $1300 An Ounce Shortly

By Peter Costa

As the economic turmoil unfolds worldwide the future for gold is looking more and more promising. It would literally take an entire essay to map out why gold is going to become the most valuable asset on the planet in the coming times. For the more immediate term I am going to map out why I feel gold will hit $1300 an ounce before the end of the fall. At this point in time everyone knows that gold is the ultimate asset. We have seen billionaires and central banks pouring their wealth into gold or gold related investments as a flee for safety from paper based assets. There are many reasons why gold is going to have precipitous growth in the coming times but I have narrowed it down to my top 3 reasons. Here are the top 3 reasons why I feel gold will hit $1300 an ounce before the end of the fall.

THE BANKING CRISIS

The banking crisis is only escalating in the United States and in the last 3 years we have had the most bank failures since the great depression. The current amount of failed banks for 2010 is at a staggering 86 and is only growing by the week. This same time last year there were 40 failed banks making the current number double what last year was. In addition 247 banks and counting have failed since 2008 and the number of banks on the troubled list has been increased from 500 to 750. This year alone we could see more banks from the troubled list close their doors for business. In lieu of the pending banking crisis troubled banks have begun issuing 7 days warnings letting depositors know that if things continue to escalate they could take up to 7 days to get depositors funds from checking, saving or money market accounts. In a time where banks are failing left right and center, the Federal Reserve has to print up enough money to protect depositors. This alone will cause massive inflation catapulting the price of gold.

LOW INTEREST RATES

Ben Bernanke head of the Federal Reserve has no plans to raise interest rates and may not raise interest rates until late 2011 therefore guaranteeing inflation in the United States. Inflation is the plan for the next while and Bernanke feels we can have positive inflation. As gold hit new record highs on June.18, 2010 closing out at almost $1264 an ounce, Bernanke denied inflation. This was the response Ben Bernanke had in regards to fears about rising inflation and the price of gold:

“Gold is out there doing something different from the rest of the commodity group. I don’t fully understand movements in the gold price, but I do feel that there is a lot of uncertainty and anxiety in financial markets right now; and some people believe that holding gold will be a hedge against the fact that they view many other investments as being risky and hard to predict at this point.”

“There is a great deal of uncertainty and anxiety in the financial markets right now,” Bernanke said. “Some people believe that holding gold will be a hedge against the fact that they view many other investments being risky and hard to predict at this point.”

We only have two ways to go in the US economy and it is inflation or deflation. There is no possible way Bernanke is going to let deflation happen because it could very quickly escalade into a great depression. We have become a consumption based economy in the United States and our industry relies heavily on consumption. If citizens begin massively cutting back on spending than we could quickly spiral into a great depression because many companies rely on our consumption and would become bankrupt. This would in turn create even more unemployment and would be the catalyst for a great depression. Everyone knows in an inflationary period gold soars. Historic record to back this fact up is the last inflationary period we had which was 1970 to 1980 where inflation peaked out at 13.3%. Due to such a high inflation rate gold grew 2400% in 9 short years it went from $35 an ounce to $850 at its peak.

STRENGTH IN THE YUAN

The yuan could appreciate by as much as 3% this year after which the yuan’s value would be dictated by supply and demand in the open market. Some analysts argue that the yuan is undervalued by as much as 40%. News of the Chinese allowing gradual appreciation in the yuan is expected to further bolster demand for gold in China as the Chinese consumers’ and investors’ purchasing power is increased. It was illegal in China to own physical precious metals until 2009 when they lifted the ban. Citizens are now allowed to purchase precious metals and are now being encouraged from the government to purchase gold and silver. With this recent ban being lifted there is one stipulation, citizens can not in any way export the precious metals they buy, they can only hold onto them. Chinese demand for gold has been growing at an average of 13% per annum over the past five years and it now has to import gold to meet national demand, despite being the largest producer of gold in the world. With gold still priced in US dollars the strength of the yuan will allow citizens to buy gold at a mere fraction of the price creating massive demand and a surge in gold prices.

I am predicting gold will hit $1300 an ounce before the end of fall this year. Before the dollar is grossly over inflated and the cost of gold is absurd, start transitioning your wealth into gold. Regal Assets has made it effortless with their website www.regalgoldcoins.com and also provide up to the minute market values for your position so you can track the growth yourself. It is not a question whether gold will grow in the coming times the only question is how fast it will grow and if the average household investor will be able to afford it.

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