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Gold Prices’ Wild Ride

In early December of 2009, the price of gold hit an all time high – nearing $1,200 per ounce. Since then, it has been a true roller coaster. Over the past week, gold price has dropped to early November levels, which is a bit under $1,100 per ounce. Since December there have been a many highs and lows for the price of gold between $1,200 and $1,100 per ounce.

Not only did the price of gold soar in 2009, but gold stocks (mining companies for example) and indexes gained upwards for 100%-200% over the past 52 weeks.

What is the Future for Gold Prices?

Are gold prices going to continue downwards, or will they reach $2,000 per ounce like some experts say? It depends on who you ask.

Many gold bulls say that the fundamentals are strong for even more record breaking gold prices in 2010. Some predict $1,400 an ounce, while others claim $2,000. In the most recent edition of Investor’s Digest of Canada, John Embry, Chief Investment Strategist at Sprott, wrote an article titled, “Expect gold to gain more than 30% this year.”

But gold had a bad month in January, losing 1.2%, and some say that trend will continue. Some call it a “gold bubble” which needs to implode eventually.

The stock market bubble in 2000 led governments to flood the financial system with liquidity to try and tame the collapse. But “easy-money” (low interest rates, printing more money) led to an even greater bubble for housing and credit, which collapsed during the past two years. The problem with “easy money” being used as a tool to fix these collapses becomes apparent when the purchasing power of “fiat” (paper) money erodes.

The gold price boom is a direct result of investors losing confidence in the integrity of these currencies, as well as obvious decline in their purchasing power. Gold has remained consistent over time for well over 5,000 years, and is considered a true safe haven from the unpredictability of paper money.


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