Wednesday, May 19, 2010

Gold falling to $800 by 2012?

In some of the best news I've seen lately, Barclays Wealth is predicting that gold is heading down in price soon.
Barclays Wealth in London predicts gold will fall to a fair value of $800 an ounce by 2012, as investors eventually dump it for riskier trades

If  "best" news seems a little odd coming from me, (Hey, I'll admit it. I'm a little preoccupied with precious metals.), let me explain.  My largest long position is in U.S. dollars.  Not because I hold so many, but because my income is 100% U.S. dollars.  Sure, that seems OK vs. the euro lately, but long-term I can't envision a happy ending.

A little further on in this Fortune article we read that high prices are leading miners to produce more and "scrappers" to sell more cash for gold. Hey, that makes sense to me.
Gold bullion dealer Kitco says places like China and Russia will help boost the amount of gold from mining by 4% to 6% a year through 2014.  Because it costs miners about $480 on average to extract an ounce of gold, they plow ahead when prices are high, eventually leading to an oversupply situation.

Gold as $1,200 also brings out the sellers and resellers.

Still, I think all the money that governments worldwide have (and will!) create amounts to an inflationary pig in a python of biblical proportions.  If I have to balance the risk of a drop to $800 vs. a move to an inflation adjusted high, I'll take my chances on gold--even at $1,200!

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