Thursday, July 22, 2010

Forecast For $1,000 Gold

As reported by the Wall Street Journal's "Market Beat" blog, an economist with London’s Capital Economics has predicted gold will drop to $1,000 by the end of the year.
[H]ere are [Julian] Jessop’s thoughts:

“With inflation risks low, it would now take a major new shock to propel gold prices significantly higher. That said, it is not difficult to think of candidates for just such a shock, including the threat of EMU break-up, renewed doubts about the creditworthiness of a major country such as the US or Japan, and the risk of a trade war between China and the West. But none of these risks are likely to come to a head over the remainder of this year. Accordingly, we continue to expect gold prices to drop back towards $1000/oz by end-2010.”

This forecast says something about the gold market right now, as bearish ones tend to surface when the metal's run into price difficulties. There were some early this year; those faded when gold got on a roll. A contrarian would say that the credibility of this forecast says gold is closer to a low than a high.

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