Gold Could Move Above $2,200

October 11, 2010, Los Angeles – The price of Gold rose one percent to $1,345.80 an ounce on Friday for a gain of 2.1 percent for the week. Fueled by concerns over the safety of paper currencies and the outlook for major global economies, Gold prices have rallied more than 20 percent this year. The price of Silver rose 2.8 percent to $23.16 an ounce on Friday for a gain of over 5 percent for the week.

The week began with the dollar falling to a near nine month low against a basket of six major currencies on the threat of the coming possibility of a second round of quantitative easing.

“The uncertainty everywhere globally now is causing people to choose gold and silver as safe-haven choices,” said Mike Daly, gold and silver specialist with PFGBest.

Following the Bank of Japan’s surprise move to inject more funds into the country’s struggling economy and drop interest rates to virtually zero, the precious metals market quickly added over $25 an ounce to the price of Gold on Tuesday.

In an interview published Tuesday Chicago Federal Reserve Bank President Charles Evans told The Wall Street Journal, the Fed should do “much more” monetary easing to help spur the economic recovery.

Evans said the Fed might aim to overshoot its informal 2 percent inflation target for a time to make up for lost ground, by using a policy tool known as price level targeting. “That is a potentially useful policy tool at this point and I definitely think we should study it more,” Evans said. New York Fed President William Dudley has also supported the use of this monetary policy tool.

Even though the price of gold has moved into uncharted territory, DundeeWealth’s Chief Economist Martin Murenbeeld said bullion has room to surpass its inflation adjusted all time highs at above $2,200.

James Turk founder of Goldmoney said he foresees a coming drop in the Gold/Silver ratio, the number of ounces of Silver needed to buy an ounce of Gold, extending its recent decline below 60 to levels not seen since the early 1980s, to near 20. “I’m more bullish on silver than I am on gold because I think the ratio will fall,” he said.

When policy makers debase currencies through quantitative easing programs, physical Gold will continue to represent real value.
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