The Stars Are Aligned to Keep Gold Aloft

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"In the next two to three years, we could easily see $2,000 to $3,000 gold," said Nick Barisheff, portfolio manager of the Millennium Bullion Fund, a mutual fund that invests in precious metals.

As gold crested $1,000 (U.S.) an ounce for the first time yesterday, the message from pundits was consistent: It could go a lot higher still. The sky's the limit, some say.

But what if the sky were to fall?

The doomsday message is a tough sell when gold appears to have caught the perfect wave. It would be hard to envision any way that more factors could be simultaneously lined up in gold's favour...

First, let's consider the multitude of positives that have led gold to the thousand-dollar promised land, many of which could remain in place for at least the next few months:

The falling U.S. dollar. Gold typically trades off the greenback, both because it is priced in U.S. dollars and because it is considered the rock-solid alternative to currency mood swings. The dollar's six-year slide has been a boon to gold, and that is being accelerated by the U.S. Federal Reserve Board's sharp interest rate cuts, which have driven investors away from U.S.-denominated holdings.

Market and economic jitters. Gold is a traditional investment safe haven. As long as the financial markets and world economy look shaky, gold is a natural place to hide...

No wonder, then, that many experts see considerably more upside for gold.

"In the next two to three years, we could easily see $2,000 to $3,000 gold," said Nick Barisheff, portfolio manager of the Millennium Bullion Fund, a mutual fund that invests in precious metals.

Yet despite gold's bullish fundamentals, the overblown nature of the commodity markets remains a nagging threat. Investors have already witnessed asset bubbles burst in the housing and credit markets, with widespread implications; should a third shoe drop in commodities, the flight from the asset class would almost certainly sideswipe gold.

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