Future Price of Gold Fundamental Reasons to Climb Higher!

Recent gold price increases ominous sign of economic concerns around the world and hedge against future inflationary concerns. When investors and financial institutions are worried their investments are devaluated as financial markets around the world experience a crisis, gold becomes a safe haven for financial security and price appreciation. Fundamental reasons have moved the price gold higher and analysts see more gains in the future

Future of Gold price observations:

1.) Central Banks monetary policy around the world has steadily lowered interest rates as a result of economic downward revisions, expectations and current news events of a recession. Subsequently a country's currency falls or devalues: Price of imported goods and services increase. Besides traveling overseas cost is higher as exchange rate reflects less buying power. 1 Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago said: "UP the road, you're looking at government devaluing their currencies to pay for the financial crisis. It's the ultimate fight to safety for gold." 4

2.) The $789 Million stimulus package to revive the economy, and Troubled Asset Relief Program (TARP) $700 billion package approved by Congress ($14 billion help Chrysler and General Motors 2):

"... many analysts believe is decidedly dollar-negative and predictive of continued rise in the rate of inflation." (3): Gold is the beneficiary. Also, the Treasury Borrowing Advisory Committee and market analysts estimate the total borrowing costs of the TARP program and stimulus package could reach $1,500 - $2,500 billion for the 2009 financial year. The U.S. Treasury plans to sell seven-year notes every month for the first time since discontinuing the program in 1993 and eight times a year sell 30 year bonds, doubling number a year. The interest paid on the financial borrowing needs of the United States will be more than current rates, persuading borrowers to purchase these securities, and considering countries that will likely purchase these debt securities have current economic concerns. Higher interest rate paid on financial borrowing of the United States debt securities is a prelude for increased inflationary concerns, hedged by purchasing gold 5 Also, Historically gold prices rise as prognosticator for future interest rate increases. 12 The Treasury Department expects in the First half of 2009, the United States debt ceiling will reach $11.315 trillion (virtually no doubt the United States Treasury will request Congress to raise the U.S debt ceiling), subsequently gold investors will for see higher prices. 6

3.) Beside the historical record borrowing for the current financial concerns of the United States, additional financing via Treasury sales will have to be considered for funding Medicare and Social Security, fact more baby boomers expected to retire in the near future (2/ 06/ 06 : "Over the next 25 - 30 years about 75 million Americans are expecting to retire.") (8): Unless additional tax revenues are forthcoming. Future prospect for the price of gold looks promising as borrowing costs increase reflecting inflation concerns . 7

4) Central banks and private institutions around the world are forecasted by banking industry experts, increase amount of gold purchases as a protection against currency fluctuations. 3 Reuters reported (February 16, 2009 - According to Alexei Ulyukayev Russia's bank's first deputy chairman) Russia Central Bank plans to continue purchasing gold shares in reserve in 2009. 4

5.) Investment analysts from major brokerage firms including SuperFund Financial's Aaron Smith predict within the next two or three years price of Gold will reach $1,500. 3

6.) Past months of crude oil prices declines are coming to an end. Stimulus economic programs around the world eventually will stop the world wide recession and forecast economic prosperity. Demand for crude could spike back up again, escalating the concerns of inflation thus substantiality increase demand for gold. Recent news events have underscored potential price increase and future demand for crude oil: According to Reuters reported February (2009) Russia signed the largest energy deal with China for $25 billion in loans in exchange for 20 years supply of crude supplies. The Organization of Petroleum Exporting Countries (OPEC) oil production cuts (From September 2008 cut oil supply by 4.2 million barrels per day) will start to see the effects as demand for crude oil increase (world economy improves) and inventory supply falls. 9

7.) History has shown terrorism around the world have moved investors to buy gold as save hedge against economic financial disruptions and political tensions. 10

8.) Sparking the increase price of gold recently, during last quart of 2008, gold investors in North America and Europe purchased 148.5 tonnes or 811 percent increase purchase of gold coins and bars. First time in a quarter century, French investors complimented the demand purchase for gold. The demand for gold is linked to dismal outlook of economic global uncertainty and investors concerns of currency devaluation. However, despite the increase sale of gold jewelry and decline industrial demand (Fourth quarter 2008) gold price continued to remain high or climbed higher. 11

Reported February 20, 2009: Mark O'Bryne, executive director of Gold and Silver Investments Limited said in a research note: "While gold has become overbought in the short term, its medium and long term fundamentals are as sound as ever." 13

References:

1.) Insight: Gold primed to be 'mania asset' - http://news.yahoo.com/s/ft/20090218/bs_ft/eff64394fdd711dd932e000077b07658

2.) Automakers May Get TARP Aid -

http://www.thestreet.com/story/10452959/1/automakers-find-treasury-ally.html

3.) 700 Billion Reason to Own Some Gold - http://www.fool.com/investing/general/2008/10/02/700-billion-reasons-to-own-some-gold.aspx

4.) Gold Tops $975 on Demand for Store of Value; Silver Also Climbs - http://www.bloomberg.com/apps/news?pid=20601082&sid=a0jbfnTWPnoo

5.) Treasury in plans for record debt sale - http://www.restoretherepublic.com/economy/treasury-in-plans-for-record-debt-sale

6.) US Treasury Moves to Broaden Its Debt Offerings - http://www.cnbc.com/id/29014153?__source=RSS*tag*&par=RSS

7.) Higher bills for the U.S., higher prices for Gold -

http://www.bestwaytoinvest.com/stories/higher-bills-us-higher-prices-gold

8.) American Economic Collapse 2006 - http://goldprice.org/bob/2006/02/american-economic-collapse-2006.html

9.) Oil Settles below $40 - http://www.financialpost.com/trading_desk/technology/story.html?id=1269559

10.) Gold and Terrorism - http://www.safehaven.com/article-3586.htm

11.) Investors rush into gold coins - http://news.yahoo.com/s/ft/20090218/bs_ft/460e81c0fdf011dd932e000077b07658

12.) The Invisible Hand and the Pox Known as Usury - http://www.financialsense.com/fsu/editorials/kirby/2008/1003.html

13.) Gold Futures hit intraday high of $998.50 an ounce - http://www.marketwatch.com/news/story/story.aspx?guid=%7BA05B9401%2DE3ED%2D4EED%2D9BC1%2D0E06B41F9446%7D&siteid=rss