Can Gold Hit $1250?

Includes: GLD, IAU, SGOL, SLV
by: Peter Cooper

The short answer has to be yes to this question. There is nothing miraculous about $1,250 an ounce for gold, another $50 rise would be easy from this point.

Silver outperformed the percentage rise in gold on Monday and then fell further on a pull back later. It seems that gold’s volatile sister is still performing to the same old tune.

Will silver be dished again in a big financial market correction or stay standing with gold? We cannot be sure so why not just buy and hold and stay holding until the precious metals are very much higher. Day trading is for fools not investors.

Wise words

Take the advice of my old friend Chris Mayer whose excellent newsletter is one of the best read in the world.

Gold isn’t is always a good investment,’ he reminds us. ‘If you bought gold in the 1980s and 1990s, your return was abysmal. So as with all assets, there are times when gold is a really good buy and there are times when it is not. Sounds obvious, but many people seem to want to think that gold is an exception to the order of things. It isn’t…

But frankly, the gold market is set up perfectly these days. You couldn’t design it better. Bad stuff is happening — see the crisis in Europe. And you can surely bet more bad stuff will happen, given all the debt and leverage that still remains in the system. Even if you don’t know exactly what will happen or when it will happen, you know a monetary crisis is good for gold.

As an added bonus, gold has a track record, which will attract fans soon enough. And when it does, it can’t really accommodate many buyers, because the market is small. This means the chances of the gold price spiking upward are pretty good. It’s like being in the lifeboat business on the Titanic. No price will seem too high!

$5,000 gold

Chris is right. My book has gold climbing to $5,000, so making $100 an ounce here or there is really not worth the hassle – or more importantly the risk of being out of this market on the day that it does pop. Ditto silver perhaps with its leverage to the gold price aka Rich Dad’s predictions.

The day is surely dawning for some big rises in precious metals. One reader asked about the impact of a falling M3 money supply on gold. This has Bob Prechter worried but I think, in this regard, he is being too much of an economic purist and missing the forest for the trees.

Gold is only a very, very small part of the global money supply and a falling money supply does not necessarily mean a lower value for gold if investors become increasingly unhappy holding other forms of money. Indeed, that is the main reason to be so sure that gold and silver will have their rocket ship day.

Disclosure: Long gold and silver