Thursday, September 16, 2010

Nine main reasons to push gold, and silver, higher and higher

By Lawrence Williams: Gold expert Jeff Nichols, in a speech last week in Bangkok, Thailand, put forward nine main reasons for gold to rise and continue to rise in the short, medium and long term before, eventually, the bull market will end and the bears may have their day - but he sees this as a long way off yet.

Nichols reiterated his predictions on the gold price which, in the short term, could even be considered conservative in the light of yesterday's breakthrough to new highs as buying pressure exceeded that of profit-takers and those whose interests may otherwise lie in keeping the gold price down. He believes, he said, that "before long, we will see gold hit $1500 an ounce - possibly even before the end of this year . . . or during the first half of 2011." And followed with "Not only will prices move substantially higher in the months ahead - but the uptrend still has years to go . . . with gold very likely reaching $2,000 and eventually $3,000 or even $5,000 before the gold-price cycle shifts into reverse."

The nine major points which bring Nichols to this conclusion are as follows:

· First, inflationary U.S. monetary and fiscal policies - past, present, and future - along with a recession-like economic performance - a "double dip" or worse for years to come.

· Second, Europe's simmering sovereign debt crisis, which has not only undermined the euro's appeal as an official reserve asset . . . but has also pushed the European Central Bank to pursue inflationary monetary policies . . . and has pushed more investors in Europe and around the world to seek the safety of gold.

· Third, continuing - if not growing - interest by the official sector. In particular, the central banks of a number of newly industrialized emerging nations are seeking to diversify official reserve assets into dollar alternatives.

· Fourth, rising long-term saving, investment, and jewelry demand for gold from China, India, and other gold-friendly nations enjoying healthy growth in business activity and household incomes - growth that is likely to continue at least several years.

· Fifth, rising private-sector investment demand in the older industrialized nations reflecting fear of inflation, currency depreciation, and a loss of confidence in governments to deal effectively with today's economic challenges.

· Sixth, the continuing maturation of what I call the "gold-investment infrastructure" - in other words, the development of new gold-investment products and channels of distribution in many important geographic markets.

· Seventh, the relatively small size of the world gold market compared to other capital markets - such as equities or currencies - so that even small shifts in portfolio preferences away from currencies, or equities, or real estate, for example, may have little price effect on these big markets but will have a relatively large, indeed profound, effect on gold.

· Eighth, the recent onset of global food and agricultural inflation.

· Ninth, stagnant world gold-mine production for the next five years or on

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