Will Gold Price Go Up or Down?

Harry S. Dent | Friday, January 18, 2013 >>

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Everyone has been expecting gold price to leap to new highs for months now, especially with new stimulus from the U.S. and Japan and more just starting to come from China (and likely Europe).

But markets don’t like to please most investors. When you think they should go up, they tend to go down and visa-versa!

So now the number of people doubting gold is steadily increasing. And to me that means we’ll see spike in gold price soon.

But hang-on a minute. You may have heard that I’m calling for gold to plunge to $750 an ounce. If you have, you might be wondering right now, “What is this guy smoking?!?”

Let me clarify for you. I DO believe gold will ultimately meltdown to lows last seen around 2008. In fact, I wouldn’t be surprised if the gold price drops lower than that because that’s what bubbles do when they deflate. They drop down to pre-bubble levels, often lower.

But that’s my medium-term forecast for gold price. I’m talking gold $750 around 2015.

First, I see gold catching investors off guard… again…

Gold hit an all-time high of $1,934 in early September 2011. Ever since then it’s been trading between $1,520 and $1,800.

That’s two years of essentially going nowhere.

What gives?

Well, there are two things that seem to drive gold price at the moment. The first is purchases in India and China, which together make up 52% of demand for gold. Particularly India mostly uses this gold for jewelry.

But both economies have been slowing… so gold hasn’t had the fire beneath it to flourish.

The second thing gold responds to is potential financial crises and the typical reaction to print money. Europe’s last big surge of money printing was in late 2011 and early 2012. There’s been nothing since. And China pulled back on monetary stimulus in the last year to curb its extreme real estate bubble.

It has only been the U.S. that stepped back up strongly in mid- to late-2012 with QE3 and QE3 plus. Gold rallied on that move, but has since pulled back, especially as a few members of the Fed have started to question the ability to do QE indefinitely.

As it turns out, those are the two factors that will drive gold up in the months ahead. For starters, I expect we’ll see more money printing and stimulus from China soon. And more will follow from Europe, especially if the U.S. finally slows in the firstquarter of this year as we anticipate.

Naturally, gold will welcome more stimulus with wide-open arms.

I also expect economic trends in China and India to be a bit stronger in the first half of this year… before a global downturn.

But, there’s another important reason I believe gold will surge ahead… before it rolls over. That is: everyone is now bearish on gold. More and more media articles are pronouncing it dead!

That is always a bullish sign.

And traders have been at their most bearish in years THREE times in recent months.

There’s a high chance gold will go to new highs in the next few months, where it will peak as global slowing returns and deflation in prices takes hold (at least into 2015 or so).

Don’t give up on gold yet, unless it breaks convincingly below $1,520.

And when we see a new high over $2,000, it’s time to start unloading the boat!

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Harry

 

 

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Categories: Commodity Cycle

About Author

Harry Dent

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

  • Geoffrey Boynton

    You appear to believe that faith in fiat currency will continue ad infinitum. What’s your view on the derivative market, apparently looming at one and a half quadrillion? Any worry there? You appear not to believe that money is an instrumental contract between supply and demand. Very interesting.

  • Lee Goodland

    Hi Guys, Thanks for the Newsletter. A work colleague has bought gold and keeps asking about your Newsletter advice. I will try to sign him up: he needs the advice
    Regards
    Lee

  • Frederick

    What about central bank buying, now they are net buyers, previously they were net sellers.That should make a big difference to demand and eventually to price

  • John mc keon

    Will the Feds keep printing money,and for how long?

  • James

    I have heard blame placed on Goldman for predictiing, on April 11th, gold would fall to 1425 this year and 1200 next. Yesterday they raised their GDP estimate from 3% to 3.2%.

    First Goldman drives investment out of gold, to free up money for the stock market, but when the money does not flow into the market, they try to stimulate the stock market with rosey predictions. Are they in the pocket of the government, since they survived unscathed from the financial debacle of 2008?

  • Curtis R. Bell

    I’m new to your reading and you’er different than most line here of predictions that I read from other professionals and some are similar. Happy to get your e-mail.

    Curtis R. Bell