Gold mining's most prestigious event, the Denver Gold Forum, is one of the most accurate barometers of where gold prices are headed. This year's forum just ended, and you may be surprised at what this group thinks gold is going to do next...
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Industry Insiders Discuss Where Gold Prices Are Headed and How to Profit
Gold Prices Headed for $2,000 an Ounce
Gold prices this week picked up again but are still far from last year's record $1,920.30 an ounce, reached in September.
The most-active June contract settled on the Comex Friday at $1,660.20 an ounce, for a gain of 1.8%, or $30.10, since the April 5 market close.
Given the economic volatility in 2011, last year was a banner year for gold prices. Fears of global market turmoil helped push the yellow metal to record highs.
While the long-term bullish outlook for gold remains, short-term pressures have halted its steady climb.
"Gold has found more support recently, but it doesn't have all of the catalysts in place to be driven substantially higher yet," Suki Cooper, an analyst at Barclays Capital, told Reuters.
Here's why this dip isn't the start of a bearish gold year, but a chance to stock up before gold prices thrive and head to $2,000 an ounce.
The most-active June contract settled on the Comex Friday at $1,660.20 an ounce, for a gain of 1.8%, or $30.10, since the April 5 market close.
Given the economic volatility in 2011, last year was a banner year for gold prices. Fears of global market turmoil helped push the yellow metal to record highs.
While the long-term bullish outlook for gold remains, short-term pressures have halted its steady climb.
"Gold has found more support recently, but it doesn't have all of the catalysts in place to be driven substantially higher yet," Suki Cooper, an analyst at Barclays Capital, told Reuters.
Here's why this dip isn't the start of a bearish gold year, but a chance to stock up before gold prices thrive and head to $2,000 an ounce.
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Why Gold Prices Should Thrive
Last week was a challenging one for gold investors. Gold prices have been on the downside.
Although the yellow metal has been on a spectacular 11-year bull run, recent strength in the economy has some thinking gold's heyday is over.
As I often say, investing, like life, is about managing expectations-even throughout gold's decade-long rise, price action over the short term can go both ways.
It helps to look at what happens after short-term drops.
For example, looking at the past decade of one-day 5% declines in gold, you can see that this event is pretty rare.
In 2006, gold dropped more than 5% in a day only two times. In 2008, there were three such events.
Another one occurred at the end of this February. Take a look:
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Don't Be Fooled by Gold's Recent Dip – We'll Still See $2,000 an Ounce in 2012
If you're concerned about where gold prices are headed after yesterday's (Wednesday's) bear-market buzz, don't be. This is just a brief pit-stop in what continues to be an epic bull-run for the yellow metal.
Gold prices fell below $1,600 an ounce Wednesday for the first time since October, settling down nearly 5% at $1,586.90 an ounce Comex division of the New York Mercantile Exchange (NYMEX). That's below the closely-watched 200-day moving average for the first time since January.
There are a few reasons for this slump: Panic over the Eurozone and its weakening currency, banks' need for cash, and year-end profit-taking have all taken their toll on gold this week.
Still, while gold prices may be stumbling right now, they are not headed for a long-term bear market - not even close. In fact, it's something our own gold and global resources specialist predicted months ago.
Money Morning Global Resources Specialist Peter Krauth said as far back as August that gold prices were due for a pull-back, so this minor blip isn't surprising - and it definitely isn't permanent.
"This is something I saw coming," said Krauth. "Back in late August, as gold was pushing $1,900, I told my subscribers it was due to pull back, and likely to trade in a range between $1,600 and $1,800, and that's exactly what we've seen so far. We could see a bit more weakness, but I think we're much closer to a bottom at this point."
Here's why.
"As investors flee the euro, the "risk off' trade means they're falling back on the U.S. dollar," said Krauth. "A higher U.S. dollar, in turn, means lower gold because gold is priced in U.S. dollars."
Krauth said Europe's economic turmoil has forced the region's banks to hunt for more cash, which has led to more gold leasing transactions, further pressuring the precious metal's price.
"European commercial banks are desperate for cash," said Krauth. "They could well be "borrowing' central bank or other sourced gold to lend out simply to raise cash temporarily. Interestingly, gold lease rates just spiked back up on Dec. 7, the very same day we started that recent bout of gold price weakness."
Gold prices fell below $1,600 an ounce Wednesday for the first time since October, settling down nearly 5% at $1,586.90 an ounce Comex division of the New York Mercantile Exchange (NYMEX). That's below the closely-watched 200-day moving average for the first time since January.
There are a few reasons for this slump: Panic over the Eurozone and its weakening currency, banks' need for cash, and year-end profit-taking have all taken their toll on gold this week.
Still, while gold prices may be stumbling right now, they are not headed for a long-term bear market - not even close. In fact, it's something our own gold and global resources specialist predicted months ago.
Money Morning Global Resources Specialist Peter Krauth said as far back as August that gold prices were due for a pull-back, so this minor blip isn't surprising - and it definitely isn't permanent.
"This is something I saw coming," said Krauth. "Back in late August, as gold was pushing $1,900, I told my subscribers it was due to pull back, and likely to trade in a range between $1,600 and $1,800, and that's exactly what we've seen so far. We could see a bit more weakness, but I think we're much closer to a bottom at this point."
Here's why.
A Weak Euro and the Scramble for Cash
One of the biggest factors contributing to lower gold prices is the Eurozone and its increasingly weak currency. The euro fell Wednesday to $1.2998 against the dollar, its lowest level since January. That forced many traders into the dollar."As investors flee the euro, the "risk off' trade means they're falling back on the U.S. dollar," said Krauth. "A higher U.S. dollar, in turn, means lower gold because gold is priced in U.S. dollars."
Krauth said Europe's economic turmoil has forced the region's banks to hunt for more cash, which has led to more gold leasing transactions, further pressuring the precious metal's price.
"European commercial banks are desperate for cash," said Krauth. "They could well be "borrowing' central bank or other sourced gold to lend out simply to raise cash temporarily. Interestingly, gold lease rates just spiked back up on Dec. 7, the very same day we started that recent bout of gold price weakness."
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