A $1,600 Gold Price in 2010?

A $1,600 Gold Price in 2010? Gold to Rise as System Collapses

January 17th, 2010 - 8:12 pm | by GoldAlert

Gold Price News

Gold price volatility has picked up in the past few weeks as diverging views about the next move in the price of gold have intensified. The gold price declined $152 off its early December high of $1,226.50 before rallying to move comfortably back above $1,100 per ounce. While gold has seen violent daily and monthly oscillations, the longer-term trend has been decidedly positive over the past decade - with investors driving up the gold price 281% over the past ten years. The events of the last 18 months have further strengthened the fundamental investment case for gold as conveyed to Barron’s by their all-star panel of money managers and investment strategists. No longer relegated to the backwater of the investment landscape, gold-related investments have slowly but surely entered into the mainstream.

This past weekend, Barron’s published part one of its annual Roundtable with a high-profile panel that included Bill Gross, Mario Gabelli, Fred Hickey, Felix Zulauf, and Marc Faber. While the group was cautiously optimistic on stock prices due to the continued efforts of governments across the globe in providing liquidity and stimulating demand, it was this same public sector profligacy that prompted many of them to espouse the bullish case for gold.

Panelists voiced agreement with Mr. Zulauf’s statement that “Central banks have spent trillions of dollars to manipulate asset prices higher, and that’s a positive in the near-term.” Gains of 5% to 20% in the coming year - fueled by government spending and strong corporate profits - was the consensus among the money managers and investment strategists. Zulauf, as he has in the past, expressed his concern with excessive government spending and the eventual price that could be paid for America’s deteriorating balance sheet noting, “All federal debt, including unfunded liabilities, isn’t 100% of GDP, but 600%. Eventually the U.S. will arrive at a point where as Marc (Faber) says, interest payments on government debt all of a sudden go to 20%, 25%, 30% of tax revenue. And once you go above 30% you are done. You go into default or your currency breaks down and your system collapses.”

Marc Faber criticized Chairman Bernanke and the Federal Reserve for causing the asset bubbles, exclaiming. “The Fed and certain academics in the U.S. don’t understand the instability brought about by excessive credit growth and artificially low interest rates…In a January 3 speech in which Mr. Bernanke talked about monetary policy and house-price inflation, he never once mentioned excessive credit growth.”

The concept of excessive credit growth and the future implications of policymakers’ deflation-fighting tactics that were implemented to ward off another depression appeared to resonate with most of the panel. Fred Hickey, editor of The High Tech Strategist and a long-time gold bull, laid out the situation in blunt terms, “The Fed will continue to print. It doesn’t have a choice. Other countries backed off investing in the U.S. Central banks are buying gold. Who will fund our deficits? The Fed will keep printing until the dollar falls apart…I’ve been in gold for a decade. It could go up to $1,600 an ounce this year.”

Zulauf concurred with Hickey stating, “At some point, gold could have a quantum leap.” While Zulauf conceded a correction in the gold price to $1,000 was possible as the U.S. dollar strengthened versus the euro and pound, “eventually it will go to the over-belief stage and trade for a few thousand dollars an ounce. It will take a few more years. Gold will perform better than stocks in the next five years…At some point, gold stocks will fly, but the safest bet in the gold market is bullion.”