-- Posted Tuesday, 21 April 2009 | Digg This Article | | Source: GoldSeek.com
The gold price is poised to break through $1,000 an ounce this week and could reach $1,500 before a price consolidation. Yesterday gold and silver closed higher while global stock markets fell as the five-week rally ended.
This is an important trend reversal and marks a shift by investors to safe haven assets in advance of another plunge in equity values.
The US dollar also strengthened across the board and bond prices rose. It is unusual to see both gold and the dollar rising together but again this normally signals an important trend reversal.
Money supply growth
The fundamental case for investment in precious metals has also become overpowering. Global bank bailout and stimulus packages have resulted in a huge increase in global money supply that has never had any effect except inflation in all history.
The gold supply by contrast is relatively fixed and production is actually falling. Supply is even tighter for silver – where stock levels are a hundredth of gold – and that is reason enough to expect the established pattern of silver outperforming gold will be repeated again.
As investors rotate their assets out of stocks and into alternative asset classes the best returns are therefore likely in precious metals, and such information tends to be self-fulfilling.
There are all sorts of minor trends supporting this basic trend, and like any true bull market there will be a compounding of supporting evidence: from a shortage of gold available for bank leasing to UK Prime Minister Gordon Brown’s call for IMF sales, often seen as a contrary indicator as his previous calls boosted gold prices.
Trend is your friend
However, in all investment markets it is the trend that is really your friend. The next dilemma will be how to best leverage the upside to the gold price.
This will start with a debate about silver as a better alternative. But then gold and silver stocks will come under the microscope, and the value of the bombed-out junior stocks brought into focus.
It can be little consolation that great days lie ahead for gold for this signals the failure of the conventional investment universe, and that means further horrors ahead for currencies, stocks, bonds and real estate.
-- Posted Tuesday, 21 April 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link