$2,000 an ounce gold is in the cards

MarketWatch ^ | March 18, 2008 | Chuck Jaffe

[george76]

Frank Holmes, chief executive officer at U.S. Global Investors, says that gold will hit $2,000 an ounce and that while the move won't be straight there from current levels investors should not be surprised by it.

Holmes noted that virtually all commodities have gone through their "inflation-adjusted 1980 price levels," with the notable exception of gold, and that to get to that range the price of gold would have to top $2,000 an ounce. Holmes said he expects a short-term pull-back in gold -- based on a correction he sees coming in oil and a short rally in the dollar, both of which will impact gold prices -- but that the long-term trend will be strongly upward.

Holmes noted that gold correlates to the price of oil 90% of the time -- meaning it moves with oil prices almost all the time -- and has an inverse relation to the dollar 70% of the time. With oil prices on the rise and the dollar weakening, it's a market condition that bodes well for gold, especially because gold is "not at astronomical levels yet, when compared to other commodities ... There's a lot more room."

Holmes also noted that he's more concerned with the market entering a "big deflationary cycle" than he is about Federal Reserve rate cuts sparking inflation, noting that "inflation is easy to stop."

[george76]

Therefore , we should sell gold now...?

.

[narses]

NEW YORK (AP) — Gold futures had their worst day in nearly two years Wednesday, beaten down after a smaller-than-expected interest rate cut bolstered the dollar and diminished the metal’s appeal as a hedge against inflation.

Other commodities also traded lower, with crude oil, silver, copper and agriculture futures all falling sharply as part of a broad commodities sell-off.

The Federal Reserve on Tuesday lowered interest rates for the sixth time since September, moving aggressively to counter growing turmoil in financial markets that led to the near-collapse of investment bank Bear Stearns Cos. The Fed cut its benchmark federal funds rate by three-fourths of a percentage point, helping to propel the Dow Jones industrials up 420 points Tuesday.

But the Fed’s move fell short of the full one-point cut many investors had hoped for, propping up the battered dollar Wednesday and sparking a huge sell-off of hard assets from heating oil to platinum and soybeans.

“Things turned really ugly, really fast in the commodities complex today,” Jon Nadler, analyst with Kitco Bullion Dealers in Montreal, said in a note. “Once the dollar started eaking out small gains this morning and crude oil started losing serious ground, the sell-off in precious metals gathered steam and left a wide swath of damage in its wake.”

Gold for April delivery plunged $59 to settle at $945.30 Wednesday on the New York Mercantile Exchange. The 5.9 percent decline was the largest one-day loss since June 2006. Gold soared to an all-time high of $1,033.90 Monday, following the Fed-approved bailout of Bear Stearns by JPMorgan Chase & Co.

http://www.freerepublic.com/focus/f-news/1988424/posts

[george76]

[BurbankKarl]

haha...yeah right.

[Dane]

I knew the gold bugs(not you) would post something to continue the air in their bubble.

[Mike Darancette]

Gold dropped about 6% today.

[gondramB]

Another way to look at that is that Gold isn’t even keeping up with inflation.

[montag813]

Therefore , we should sell gold now...?

I told this forum in January to buy gold futures for a move through $1000. I said it would not stop at $1k but go to $1025 or $1030 as shorts rushed to cover, and that would be a good place to take profits. It is a bit late now.

Gold has some minor support from the Feb 1 high, which held today. The problem is the RSI divergence at this last top, whch could mean some continued selling over the next few weeks before consolidation occurs.

[Publius]

The President's Working Group on Markets, often referred to as the Plunge Protection Team, has long been manipulating precious metals for the purpose of propping up the dollar and disabling the world's traditional signal of inflation. For the past decade I've enjoyed watching the gold bullion banks, working at the behest of the Plunge Protection Team, telegraphing their moves. First, they will short the stocks that make up the HUI, the AMEX gold mining index, causing gold stocks to drop disproportionately. Then, 24 hours later, when London opens, they will hammer gold with short sales. As a rule, they also work on silver to maintain a strict 50-to-1 gold-to-silver ratio. This has been standard operating procedure ever since I began observing the precious metals markets a decade ago. Yesterday, when the Dow, S&P and Nasdaq went up by almost 4%, the HUI was hammered for a 5% loss. This was the signal for a move on gold by the Fed and friends. At dinner with some of my rail colleagues last night, I explained what happened and said, "Tomorrow the PPT is going to hammer gold for $50 to show the world that everything is fine."

I was off by $10. It went down by $60.

Today the HUI dropped another 7%, which is about right for a 6% drop in gold, but I smell a rat. If I'm right, there will be more liquidation in gold tomorrow with another significant drop, perhaps in the $50-80 range.

As to whether this is just noise in a continuing bull market upleg or the beginning of a correction and long consolidation, I can't say. The latest upleg has been prodigious, so if the market consolidates, and then coils and twirls for a year before the next upleg, that's fine with me.

[SierraWasp]

You bedder start pingin me to phunny stuff like dis!!!(snicker)

[kittymyrib]

The hedge funds were having to come up with more cash today, so they were selling the only thing of value they held...commodities. Ag futures were down the limit and copper, as well as gold, was beaten down today. Even oil looked shaky, as refiners are buying less crude every week because of a slowing demand for gasoline and heating oil.

I wouldn’t wish Bernanke’s problems on a monkey on a hot rock.

[Petronski]

That would STILL fall short of the record high in real terms.

[SierraWasp]

Plus, it doesn't pay and divedends or interest!!! It's heavy and hard on the bottoms of your pockets and just creates gravity in your pants!!!

Din't you guys ever see Kramer on Seinfeld tryin to walk down the street with his pants pockets bulging with metal coins? It was hilarious!!!

[Mr. Jeeves]

Gold really isn’t going anywhere - it’s just that the dollar has been dropping like a rock. If gold goes to $5,000/oz it will represent a roughly equivalent value to what it represents today - it’s just that nobody wants Bernanke’s paper...unless it’s the new Amero. ;)

[george76]

ok

[george76]

Hedge Funds can not so easily get leverage lately ?

[Dog Gone]

I’ve always kept a gold mining company or two in my portfolio, and I’m looking like a genius now.

But it’s just making sure you’re always diversified.

[Who dat?]

Holmes noted that virtually all commodities have gone through their "inflation-adjusted 1980 price levels," with the notable exception of gold, and that to get to that range the price of gold would have to top $2,000 an ounce.

Hmm… it happens that in the mid/late 80’s I acquired XX ounces of “Liberty 1oz Fine Gold – 50 Dollars” coins. Also came to own ~ XXX ounces of the “1974 999 Fine International Universal Trade Unit” silver coins.

I suppose if anyone is interested in purchasing my “holdings” I’d be willing to entertain the idea. In addition, I also have a pretty-clear CA driver license, SS card, and passport. Not that I’d necessarily “sell” them – just willing to entertain the idea…

[tubebender]

I have a ounce of gold... I go to my grocery store... I buy a quart of milk for $22.43...I also buy a loaf of bread for $22.43...I also buy a dew slices of lunch meat for $16.53...I give my grocer my ounce of gold worth $2000... what does the grocer give me for change?

[DManA]

Should have sold yesterday.