Let’s face it. With the US economy facing the bitter consequences of extravagance and unscrupulous spending, it has become quite difficult for the US to manage both its public and private debts now. In this phase of post recession hangover and economic meltdown, the U.S. federal government has bumped up against its permitted borrowing limit. According to Alison Fraser, director of the Roe Institute for Economic Policy Studies, America’s debt just crossed $15 trillion, which means presently, the amount owed by the United States government to the world, is equivalent to the amount produced by the American economy per year. All these factors lead to higher prices and intensifying inflation concerns in the U.S.
Along with the U.S., there is the raising euro zone crisis where a number of European countries like Greece, Ireland, Portugal, Spain, and most recently Italy failed to pay their sovereign debts and consequently are heading towards insolvency. In fact Europe’s weakening economic performance literally forced the European Central Bank to follow more accommodative monetary policies. In short, both US and European economies are going through several years of sub-par economic commotion, high unemployment, and rising inflation. However in the midst of economic turmoil, when unemployment is up and there are conflicting tax increases, the price of gold is soaring almost beyond belief. It seems the skyrocketing gold price has a strong impact on both the dollar value and the European debt crisis as well. Read ahead, to know the latest forecasts about the future of Gold price.
- In the course of this ongoing bull market, it seems the gold price would reach $3000, $4000, and even $5000 an ounce.
- However, the gold price graph will surely include erratic growth as there will be lots of ups and downs in Gold prices. It can hit the all-time record high $1,924 an ounce or can go down to the recent low of $1,580, which is certainly a drastic decline not necessarily indicating the death of the Gold bull market. It could just be a repetition of something that had happened before at the time of the Lehman bankruptcy in 2008 or in the 1970s incident, when gold corrected several times by 15% to 20%.
Bullish Building Blocks
There are bullish building blocks contributing to the rapid growth of the gold price. The most obvious one is the US Federal Reserve monetary policy, which is known for low real rates of interest and precarious central bank monetary creation. The list continues with the US federal government budget deadlocks, the rise in U.S. sovereign debt and the decline of U.S. creditworthiness, the anticipated future downgrading of the US dollar in the global currency markets and the consequent decline in the purchasing power of American consumers.
Other problems include, the skyrocketing insolvency of some European nations resulting in the possible breakdown of Europe’s Monetary Union and the gradual rejection of the euro, by some of the EU member countries, the rise of global inflation stemming from excessive monetary creation as well as world population growth.
Along with all the aforementioned points, factors which can influence the long-term growth of the gold market are the increasing political disintegration, the financial prosperity of the “emerging-economy nations” especially in the gold welcoming countries like China and India.
In fact mention must be made of the emerging-economy central banks, the sudden rise of demand and popularity of new gold investment vehicles and channels of disbursement, especially gold exchange-traded means, which pave the way for growth and progress of physical gold investment by both retail and institutional investors. Last but not least, presumably gold-mine production won’t be able to keep pace with the estimated growth in global gold demand. To conclude keeping these bullish building blocks in mind, it seems gold’s future remains bright and it will get brighter down the line.
In addition to Fear… Chinese demand may be driving up the price of Gold. See: Why (and How) China is Boosting the Price of Gold for more information.
Sidney Terrell is an associate writer with Oak View Law Group. Her expertise includes finance and investment. She has written several articles on debt settlement, bankruptcy, bill consolidation and mortgage since 2005.