Jeff
Nichols still believes that gold prices will go above $2000/oz in 2012.
He forecasts $2000 levels in the first half of 2012 and in the longer
term, the yellow metal is expected to ride higher to $3000, $4000,
$5000. Because of the following twelve factors, he still believes in a
yellow metal rally in 2012.
Twelve bullish factors for gold in 2012
--Past and prospective U.S. Federal Reserve monetary policy, characterized by low or negative real rates of interest and unprecedented central bank monetary creation.
--The U.S. federal government budget impasse, rising U.S. sovereign debt, and eroding U.S. creditworthiness.
--The expected future depreciation of the U.S. dollar in world currency markets . . . and the continuing decline in the dollar’s purchasing power for American consumers.
--The growing insolvency of some European nations -
leading to the disintegration of Europe’s Monetary Union and the
eventual abandonment of Europe’s common currency, the euro, by at least
some of the EU member countries.
--The expected acceleration of global inflation -
fueled by excessive monetary creation, world population growth, and
changing diets in favor of more meat and protein . . . and led by
persistently high and rising agricultural and industrial commodity
prices from one country to the next.
--The increasing political instability in the Middle East and North Africa
. . . as authoritarian regimes are overthrown . . . but sectarian
divisions in some countries prevent orderly transitions to democracy . .
. with implications for world oil supplies and prices. And then, of
course, there is Iran - which remains an unpredictable “wild card.”
--The growing affluence of the “emerging-economy nations”
and the associated growth in both jewelry and private investment and
savings demand for gold - especially here in China - as well as India
and other gold-friendly countries.
--The development and popularity of new Gold investment vehicles and channels of distribution - especially gold exchange-traded funds - that facilitate physical gold investment by both retail and institutional investors.
--The legitimization of gold as an investment class and rising investor participation
. . . together reflecting a growing appreciation of the benefits of
including physical gold in a well-diversified portfolio . . . and the
entry of new, large-scale, professional investors - including pensions,
endowments, insurance companies, sovereign-wealth funds, and especially
hedge funds.
--The “stickiness” of much of the recent private sector and central bank gold demand.
This is shrinking the available “free float” in the world gold market .
. . and it means that less metal will be available to gold-hungry
buyers, except at increasingly higher prices. Indeed, many of today’s
new investors have no intention of ever selling, even at much higher
prices.
--- Eleventh bullish factor, one that I believe is especially
important to the long-term development of the gold market - is the
affect this rising wealth is having on emerging-economy central banks
. . . prompting some countries that are over-weighted in U.S. dollars
and underweighted in gold to diversify their official reserves through
the prudent acquisition of the yellow metal.
--And, twelfth in my catalog of bullish factors supporting a continuing long-term rise in the price of gold is the fact that world gold-mine production, although growing, will not keep pace with the expected growth in global gold demand.
Even a rash of new mine discoveries would take five to 10 years - or
more - to contribute significantly to supply . . . and, meanwhile,
existing resources are being depleted, nationalized by unfriendly
governments who tend not to be good mine operators, or are simply mined
out.
