LONDON (Commodity Online): Gold at $5,000? Yeah, this may be a reality if you follow the arguments offered by some analysts.
Some reasons for this argument are since hitting the bottom in 2001, gold has posted a positive return in every year. Moreover, during the past 10 years, gold has become the trade of the decade, beating commodities, oil, corporate bonds, US Treasuries and US stocks.
But, the biggest reason for gold to hit $5,000 per ounce will be the inflation. Even as the world is going ga-ga over the recovery from recession, one factor which nobody is saying is that to tide over the crisis the has been printing currency without any stops. Since 2001 under price inflation of roughly 2.5% gold has gone up by 400%.
From October 2008, during a very short span of only four months, the central bank doubled the money supply, going way beyond anything ever attempted in the nation’s history. Worldwide, central banks have rolled out an unprecedented $12 trillion worth of stimulus programs, with most of the money still to be spent. So, inflation is here to stay and when inflation is up gold prices are set to soar.
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Another thing which will help Gold prices rise is the rising number of institutional investors. Proliferation of gold-focused exchange-traded funds (ETFs) bears this out.
Asia is stoking global demand in a big way. is overtly encouraging its citizens to buy gold and silver, while offering them gold-linked checking accounts. has already overtaken as the world’s largest consumer of gold. A quickly developing middle class whose members are experiencing rapid escalations in disposable income are a major bullish driver for the price of gold.
India’s recent purchase of 200 tonnes of International Monetary Fund (IMF) gold was the likely impetus that pushed gold up over the $1,200 level in December. But more important is the sea change that has seen central banks morph from net sellers into net buyers of gold. This trend is set to continue and will further boost gold prices to shoot up.
Again, the gold bubble that takes prices to all-time-record levels will inflate in three distinct stages. This process will start with currency devaluations in stage one, will be fueled by growing investment demand in Stage Two and will experience its stratospheric ascent in Stage Three, the mania phase of this evolution. The $5,000 price point will most likely be reached in this third and final phase. The price of gold will behave like it is strapped to a jet pack.
(Source: Money Morning)
