A $3,000 price tag would have seemed farfetched a decade ago, when the
price was around $300, or even when gold first crossed $1,000 an ounce
in 2009. But the political and economic uncertainty pushing gold
higher isn't over, because debt and spending problems around the
developed world look so entrenched.
Is gold really a safe haven?
JPMorgan Chase analyst Colin Fenton just predicted gold could spike to
$2,500 an ounce over the next four months. And Tom Winmill, who
manages the Midas Fund (MIDSX -1.55%), thinks gold could trade as high
as $2,200 next year, largely due to national budget issues and
economic uncertainty. Then in early 2013 after the U.S. presidential
elections, an ongoing inability to deal with national spending and
debt issues may push it even higher, he believes.
Winmilll won't put a number on how high a budget crisis at that point
would drive gold. But think of it this way: To get to $3,000, it takes
a spike of less than 30% from his projected 2012 high of $2,200. And
as we've seen this year, a 30% spike in gold is not unusual when
uncertainty drives investors to the perceived "safe haven" of gold.
This year, gold rose from less than $1,400 an ounce to more than
$1,900 an ounce, a move of greater than 30%.
Central banks, especially in South Korea, Thailand, Russia and Mexico,
are buying gold again, adding to demand. By the middle of July,
central banks had bought more gold this year than in all of last year,
according to the World Gold Council. For the first time since the
1980s, central banks have been net buyers of gold for three years in a
row, points out Deutsche Bank analyst Michael Lewis. And it's not
over. "Central banks are likely to remain net purchasers of gold,"
says the council.
http://money.msn.com/exchange-traded-fund/5-reasons-gold-is-headed-for-3000-dollars-brush.aspx
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