When top commodities Website Kitco.com set out to chronicle the Top 10 experts who were projecting that gold could reach $5,000 to $10,000 an ounce, one of those 10 gurus was Money Morning's Peter Krauth.
The Kitco story – "GoldWatch: Why Many Respected Analysts See Gold Going Up to $10,000" – was published on Thursday, the day that gold closed at an all-time record of $1,248.70 an ounce, handily surpassing the high mark reached the week before.
Economists attributed the surge to growing concerns about the U.S. economy and its proxy, the U.S. stock market. Whipsaw trading patterns in stocks, an economic malaise in the United States and a weaker dollar combined to shake gold out of the week-long trading trading range that had gripped it since June 8, when it set its last record.
Investors feel stocks may be overbought and turned to the safety of gold, putting "equities … in a precarious situation," Charles Nedoss, a senior market strategist with Olympus Futures in Chicago, told MarketWatch.com.
Goldman's Gold Call
This surge could continue. Indeed, in Thursday report to clients, Goldman Sachs Group Inc. (NYSE: GS) researcher analysts say they expect gold prices to rise through 2011.
The "the low US real interest rate environment fostered by U.S. monetary policy will continue to provide the support for higher gold prices, and we are maintaining our six-month gold price forecast of ($1,275 per ounce) and our 2011 average gold price forecast of ($1,350 per ounce).
However, if investor demand for gold continues at the "substantial" current pace, "we would expect gold prices to rise to ($1,400 an ounce) by the end of 2010," the analysts said.
But the experts quoted in the Kitco article have a much-more aggressive target for the price of gold – $5,000 to $10,000 an ounce.
In that Kitco piece, writer Lorimer Wilson said that he recently read an Arnold Bock article on that same site in which Bock suggested that gold would go to $10,000 by 2012, giving a host of sound reasons why that would be the case. Although the article "took the Internet by storm with extremely high readership," Wilson said that his "first reaction was: "Who in their right mind would even suggest that gold will eventually reach $2,500, let alone $5,000 or even $10,000?"
What Wilson found was that Bock wasn't the first respected investment writer to propose the high target price for gold. In fact, there were 10 such analysts who'd previously proposed this idea – including Krauth, whose Money Morning report, "The Five Reasons Gold Will Hit $5,000," made a solid case for the "gold superspike."
Krauth's 'Yellow Metal' Market Call
Krauth, who is also the editor of the "Global Resource Alert" advisory service, said he was "blown away" by his inclusion in with other leading gold experts.
"But at the same time, I was flattered to see that I'm in the company of many other participants/analysts/observers who feel basically the same
way about gold and its potential from here'" Krauth said in an interview.
Krauth believes gold continues to move higher from here – and said he "thinks that $1,500 is very realistic for 2010."
What's the driver?
"For me, right now, it's an increasing lack of faith and confidence in governments, their abilities, and their actions to 'fix' financial problems and,
especially, economies," Krauth said. "These are way too big, complex, and intricate to try to 'fine tune.' In fact, it's preposterous and laughable that they should think they can.
Also, when governments do things, they're usually wrong, and don't seem to consider the
unintended consequences, some of which are unpredictable, which is even more
reason to stay out of meddling with things."
Krauth has two favorite gold plays right now.
The first is Kirkland Lake Gold Inc., which trades on the Toronto Stock Exchange under the symbol (KGI). It's an Ontario gold producer that is working out some production issues, and that is currently producing about 45,000 ounces gold annually. But the company has a really aggressive growth profile, and is planning to double that to 90,000 next year, followed by 130,000 ounces in 2012 and 180,000 ounces by 2013. New production will be high grade, helping to increase profit margins considerably.
The second is Minefinders Corp. Ltd. (AMEX: MFN), which is targeting about 95,000 gold ounces along with approximately 2.4 million silver ounces in 2010. The company is undervalued versus its peers on a net-asset-value (NAV) basis, as well as on a price-per-ounce-of-reserves basis.
[Editor's Note: Prussian military theorist Carl von Clausewitz once said that "the best defense is a good offense." That adage has since been applied to many fields of endeavor – from combat to football.
It's also great investing advice – especially with such commodities as gold.
Historically speaking, commodities-related investments were superb defensive plays – particularly during periods of great uncertainty.
That's still the case.
But now, with the emergence of Asian powerhouses such as China, projected declines in global supplies, and the current debt fallout from the global financial crisis, hard assets and commodities such as gold are also the most-promising profit opportunity in the financial markets today.
Indeed, Money Morning commodities guru Peter Krauth says that some junior miners, tar-sands players and other hard-asset heavyweights can generate tenfold returns or more from Wall Street's "Great Global Commodities Grab." To find out more, check out Krauth's "Global Resource Alert" advisory service. Just click here.]
News and Related Story Links:
GoldWatch: Why Many Respected Analysts See Gold Going Up to $10,000.
- Money Morning Special Investment Research Report:
The Five Reasons Gold Will Hit $5,000.
- Money Morning "Defensive Investing" Series:
How the Greece Bailout Turned Gold Into a 'Must-Have' Investment.
Gold rises to record on weaker stocks, economic outlook
- Olympus Futures:
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.