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Will gold prices continue to rise for the rest of 2011?

predicting the price of gold with a crysal ball

The first thing to note about gold price predictions is that nobody really knows. None of us can predict the future.

That said, it certainly looks like gold prices are set to keep rising.

Yes, there have been ups and downs. If you watch gold prices by the week, day or even hour, you will always see the price rising and falling. What you need to do is step back and view the overall trend, over the course of months, quarters and years.

Do that and you’ll notice that gold prices have risen each year for 12 consecutive years.

That’s pretty amazing.

And there is no reason to believe that gold prices won’t end 2011 at an even higher price.

According to a survey of precious- metals forecasters tracked by Bloomberg over the past two years, the price of gold will rise as high as $1,713 this year, and $1,938 in 2012.

Of course, it’s pointless to try to make predictions down to the nearest dollar. But it is good to know that even top forecasters see gold bullion prices rising even further.

But again, if you step back and look at the big picture, there is no reason for gold prices to fall.

Remember, gold is a safe haven. It’s where central banks, institutional investors, and individuals put a proportion of their wealth in times of economic uncertainty.

And if ever there was a time of economic uncertainty, it’s now.

There are huge debt problems all across the European Union. And, as we know, the U.S. has its own debt problems.

But here is the thing to understand. Regardless of bail-outs, debt ceilings or anything else, most of the G20 countries have debt problems that are going to be around for a very long time.

If you have ever been seriously in debt yourself, you know how hard it is to climb out of the hole. It feels like for every $10 you earn you end up paying $5 in interest to the credit card companies and banks.

It’s no different for nation states. The U.S. isn’t going to be able to pay off its debts any time soon. They may be able to balance their budget, but that isn’t the same as paying down debt.

As a result, the economic uncertainty we all feel today isn’t going away any time soon.

More specifically, investors are no longer going to be looking at the U.S. dollar, or Treasury Bonds as the ultimate safe haven for their money.

It used to be that way. In fact, it has been that way for over 50 years. But that is changing now.

So if countries, institutions and investors are no longer willing to trust absolutely in the U.S. dollar, where else can they turn?

Well, they’ll spread the risk. But you can be pretty sure that a significant proportion of money that would have gone into U.S. dollars or Treasury Bonds is now going to be spent on buying gold.

As I have said before, as owners of gold, we should always take the long view. Let the investors and day traders worry about short-term fluctuation in prices.

For us, we just want to know that the gold we buy today will either rise in value or at least hold its value over the medium to long term.

And if we look at December, 2011as the medium term, then we can almost certainly anticipate a further increase in the price of gold.

Further reading…

6 Reasons to buy gold…

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