Not Thinking Clearly
Source: AOL, Gene Marcial (10/20/10)
"Anyone who questions the wisdom of gold is not thinking clearly."
If you think it's too late to jump on the gold bandwagon, you'll get a lot of contrary opinion—even though gold dipped on the USD's rally Tuesday. The greenback surged due in part to China's interest rates boost.
"The China interest-rate story caused some selling in gold, but it still remains above its bullish trendline," says Gold and Energy Advisor Editor James DiGeorgia. He notes gold's climb is tied to the value of the USD—not the U.S. inflation rate. And of course, the USD's value is linked to the full faith and credit of the U.S. government.
"It's the level of faith and credit of the U.S. government that's become a growing problem in the past 10 years, as gold has steadily risen," says DiGeorgia.
"Anyone who questions the wisdom of owning gold is not thinking clearly," says Investment and Research Consultant Charles Laloggia, who argues the only thing that will stop gold from continuing to rise relative to the dollar is when the Fed decides to raise short-term interest rates to more historically reasonable levels. "That's not going to happen anytime soon," he predicts.
Even the big Wall Street houses are bullish on gold. ""We expect the price of gold to continue to climb," says Goldman Sachs Global Investment Research Division in a note to investors. Goldman raised its 12-month price forecast to $1,650/oz. "With the prospects for another round of quantitative easing in the U.S. increasingly strong, U.S. real interest rates continue to fall," notes Goldman. The Fed's "return to QE will likely be a strong catalyst. . .and we expect the gold price rally to continue until U.S. monetary policy begins to tighten."