Gold Fever!

It's been a while since I blogged in, but what a time it was for gold. Last time I wrote here, gold futures had just broken $920 per troy ounce. Now, five months later, it's nearing $1150 per troy ounce.


So why the gold fever?


It's simple actually, and its a culmination of several factors working together to brew a perfect storm that will propel and sustain the gold bull forward for years to come.


The first factor is the lack of strength in the US dollar. This recently has been caused by the record low interest rates put forth by the Fed. In order to help stimulate consumer spending and bank lending, the banks were forced to lower their rates to historical lows.


Another factor in weakening the US dollar is the massive infusion of printed paper by the US Mint in order to fund the $700 billion bailout and $700 billion stimulus package that was used to save the financial system of the United States. This stampede of newly printed bills devalued the dollar.


In addition, the devaluation of the US dollar coupled with the low rates will eventually spike up a hyper-inflation scenario in the near and long term future. Because the US dollar is less in value, it will take more of it to buy stuff. Gold has always been the hedge against inflation. Hence, its value will climb even further as long as inflation marches on.

The next factor is demand. Because of the factors I've already mentioned, investors are jumping into gold for both investment profits and insurance. Even entire countries are joining into the fray. India recently purchased 200 tonnes of gold bullion from the IMF. So when countries are buying in bulk, you know demand is hot!

The last factor is supply. Recently, Barrick Gold, the world largest gold producer, announced that it is producing less gold year over year. As well, they mentioned that it is increasingly difficult finding rich ore concentrations. Junior explorers are finding more and more eroding grades of gold. Supply is dwindling.

Couple these two factors of high demand and low supply, and you got a case of high gold prices! Couple that with the rest of the factors, then you've got a gold bull running for at least another 3 to 5 years, and I predict the price of gold when all is said and done, will top out at around $3000 per ounce.

Sounds unrealistic? Hey, I didn't expect it to go from $900 to $1150 in just a few months. The impossible now seems possible.

My advice is to buy gold early when you can. The rocket is just about to take off.