When I started buying gold about 7-8 years ago, seeing that the tech bubble had run it's course, one could buy an ounce of gold for $275. As gold kept steadily climbing, I kept buying. My last BUY was around $640 an ounce early in 2007. I have sold a little between $780 and $840. One doesn't need to be greedy. So, with gold now just under $900 where is it going? It just keeps setting new records almost every week.
Before I consolidated a half dozen of my web sites under the Transformhouston.com banner, the old GOLD BANNER carried the sub title: Gold $1,500! So, that's where I "think" it can go depending upon a dozen independent variables. But, first we must break through $900 strongly. Once that's accomplished (and that could be any day or hour now), the public hype for $1,000 will be on big time!
Our economy is in big trouble.
But, the US$ is in even bigger trouble and all of that bodes well for gold.
The stock market is in trouble, and stocks in general are in a primary bear market. Gold is in a primary bull market. Gold is also safe-haven in a time when Iran is running boats around a large ship like a flea taking on an elephant. Then there's Iraq, Afghanistan, the Middle East and terrorism in general that heep a foundation under gold.
One share of the Dow now buys only 14.50 ounces of gold. This is the least amount of gold that a share of the Dow will buy since July of 1999. In 1999, one share of the Dow would buy 44 ounces of gold. Thus, in terms of real money, the Dow is now down 67 percent. And, gold is real money. Don't forget the paper money (can you say the US$) is fiat money.
Then there's this thing called inflation!
The Bloomberg report reported that gold futures in China increased as much as 10 percent on their first day of trading today on demand from local investors seeking to buy the metal on margin. The start of Shanghai trading was "the biggest event in the gold market since the launch of the gold exchange-traded funds over the past few years,'' John Reade, an analyst at UBS AG in London, wrote in a report.
Bullion for immediate delivery climbed to a record $891.70 an ounce- a new all-time record high! "Gold is going to be a great investment in 2008,'' Greg Smith, managing director of investment adviser Fat Prophets U.K. Ltd., said in an interview with Bloomberg Television in London. "The $1,000 an ounce is certainly in view now.''
If Ben Bernanke keeps lowering rates (and he will again Jan. 30th) the US$ will continue to drop, inflation will continue to rise (#3 on my ten New Year predictions), and gold; well, maybe $1,500?
ernie@lrchouston.com
