Saturday, April 09, 2005

Gold Price Forecast - When will the price Really Move Up?

In this weeks News Hour Jim Puplava gave a forecast for when the gold price will really start to move.

Mr Puplava predicts another interest rate increase in May and June with the June rate hike going too far. The Federal Reserve Bank will continue raising interest rates till something breaks as it has done in the past, Mr Puplava said.

Mr Puplava says that fundamentals determine the long term gold price, technical considerations and perceptions drive the gold price in the short term. Currently perception is that rising interest rates will make the dollar and dollar assets like bonds popular.

Mr Puplava said the current perception is that the Federal Reserve will fix the inflation problem. While central banks are trying to hammer and manipulate the gold price, investment banks are shorting gold and all the while the smart money is accumulating gold.

Mr Puplava believes the realty is that Fed won't fix inflation and will make it worse, as inflation is due to creating excess money. He expects the dollar is going to get weaker but the trade deficit won't correct. Particularly as oil consumption is expected to increase by 2% in the US while oil production is going down, the increase in the oil price is going to make things a lot worse for the deficit Mr Puplava said.

Mr Puplava said once realty sets in that Federal Reserve can't correct the dollar, and the perception about the US economy changes, central banks may not start selling dollars but they will demand dollars a lot less and less money going into the US market will mean a problem for the US dollar.

Mr Puplava says that now is a great time to be accumulating positions in gold. He recommends to not try to get in at the bottom and out at the top. Instead, he recommends trying to add and keep adding to positions. Accumulate in the quite times, If you have positions hold onto them Mr Puplava said.

Currently the the total value of mining is 100 million, there is about 35 million in gold trading. However there are trillions of dollars in currency trading and 40 trillion in equity and bond markets. If 5% of that money moves into gold there will be 20% to 30% moves up in the gold price in one day! But you have to be in it to win it.

When the currency traders realise that all the currencies are depreciating thats when there will be a run to gold. It will be like a water fall trying to fit though a garden hose Mr Puplava said.

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