Gold Price Hits New Highs, and Could Double Again
Source: MoneyWeek (10/9/09)
"In inflation-adjusted terms it still has some way to go before matching its 1980 peak of $2,300."
Various versions of this rumor have been heard before, and the plan seems absurdly impractical, said Ulrich Leuchtmann of Commerzbank, but it does "match the current zeitgeist" very well. With the dollar on the slide and its long-term prospects unappealing, its eventual demise as a global reserve currency—and what might succeed it—has become a hot topic.
As paper currencies are being debased, investors are rediscovering that gold is "the ultimate currency" as you can't just print more.
And with monetary policy so loose around the world, which greatly increases "the risk of a blow-up in inflation in the future", as Adam Farthing of Deutsche Bank pointed out, gold's role as an inflation hedge is back in the spotlight. Central banks should also become net buyers of gold now as they diversify their cash reserves. Given all this, Deutsche expects gold to exceed $1,100 next year, while John Brynjolfsson of Armored Wolf predicts $2,000 gold by 2012—and "it could happen a lot faster."