Gold Close to Record High


"The $1,650 target Jim Sinclair set nearly 10 years ago looks easily attainable."

Gold hit $1,240/oz. today. Investors seem to be increasingly parking money in the yellow metal as a safe-haven asset class while turning their backs on stocks. Bond yields are lower than before the 2008 autumn crash, an ominous signal.

Today the S&P 500 index is 14% down from its 2010 high posted on April 23rd as reports on U.S. jobs, house sales and manufacturing have confirmed a slowdown in the very modest economic recovery. The Federal Reserve has said a meaningful recovery may take longer than expected. The S&P is now on a price-to-earnings multiple of 14—the lowest level in six weeks.

Gold Outlook

Will gold now follow the late 2008 pattern and fall in value alongside stocks? Or will it be different this time? Even the real gold bugs are cautious on this but see it as a last buying opportunity before a surge in demand after the stock market crash is over.

ArabianMoney's best guess is that gold and silver prices will fall but by much less than in 2008. For one thing, the speculative positions are smaller and the leverage in the precious metals market much lower than two years ago.

However, the potential for a big gold rally thereafter is strong, and the $1,650 target set by gold guru Jim Sinclair almost a decade ago—to considerable skepticism—looks easily attainable in this environment. With the rest of the economy looking at complete shambles, there will be few obvious places to invest. . .and the narrow gold and silver markets will really take off.

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