Given the unusual volatility of gold prices recently, that might appear to be a tough question to answer.
The gold market it not used to the level of attention and activity it has attracted in recent months. With economic woes headlining in both the US and Europe, investors have fled to gold as a safe haven.
At the same time, those same investors are concerned that gold may be near the top of its rise, and frequently sell some of their gold to take profits. Also, the gold market is now having to contend with the entrance of hedge funds and other short-term players who are working the market as short-term investors.
In other words, the gold market is more active than ever before, with huge amounts of money in play. As a result, we are seeing a great deal of volatility, with quick rises, followed by steep corrections, with both sometimes taking place within the span of a single day.
As always, my advice is to step back, take a deep breath and consider the fundamentals.
One thing I always ask myself is, “Is there a better alternative to gold?” In other words, where else would one put one’s money to give it safe, and perhaps see a little growth?
None of the G20 nations fit the bill right now. All are struggling.
None of those countries’ currencies fit the bill. They are struggling too.
There is no obvious alternative right now. And there seems to be no good news on the horizon. It seems things will only get worse in the economies of the US and in Europe. Even China has lost its lustre.
This is why money is still pouring into gold, why investors are nervous, and why the gold market looks more like a pressure pot…heating up, releasing pressure, and so on.
Are we close to the top? Or will gold continue to rise indefinitely?
Indefinitely isn’t a very precise word. So let’s ask the question a little differently: Will gold prices continue to rise for the remainder of 2011?
My guess is that they will, some perhaps severe corrections along the way notwithstanding.
If you are thinking that even if all goes well, gold prices might reach as high as $2,000, you may want to think a little bigger.
Read some of my previous posts in which I feature predictions of much, much higher gold prices.
John Paulson predicts gold prices will go as high as $4,000 an ounce
James Turk predicts gold prices will rise as high as $8,000 an ounce.
The Queen’s stockbroker predicts gold at $12,000 an ounce. I hope he’s wrong.
Further reading…