That Was the Week That Was: U.S. Economic Policy and the Future Price of Gold

Over the past year, short-term changes in the price of gold, both up and down, have largely mirrored shifting expectations of U.S. Federal Reserve monetary policy and the reaction of short-term institutional speculators operating in futures, ETF, and other "paper" derivative markets.  The past week - with gold first falling sharply then recovering smartly, and then dropping again - has been no exception. To little surprise, gold registered its biggest one-day gain of the year on Tuesday as Federal Reserve Board Chairman Ben Bernanke, in his semi-annual report to Congress, eased market fears ...

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U.S. Election Results: Best of All Possible Worlds for Gold

Tuesday's election outcome - with President Obama returning to the White House, the Democrats retaining a weak majority in the Senate, but without enough seats to overcome a Republican veto on important legislation, and a strong Republican majority in the House of Representatives - may be the best of all possible world's for gold investors. Just a month ago, on October 5th, gold reached an 11-month high just over $1,795 an ounce.  Since then, in the run up to yesterday's election, the yellow metal slumped as low as $1,672 - reflecting the prospects that a Romney victory might bring a reversal ...

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Gold: Treading Water in Turbulent Seas

Gold has been somewhat of a disappointment to many analysts and investors who, as of a few months ago, were still anticipating higher prices again this year.  But the year is not over, nor is gold's long-term secular bull market. With eleven years of advancing prices already chalked up on the scoreboard, the long-term secular upswing has five-to-ten years of life still ahead - and maybe more.  Along the way, expect continuing volatility, periods of consolidation, and occasional corrections, corrections sometimes so severe that some will prematurely and incorrectly call the game over. We ...

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Gold – Just an Innocent Bystander

"At some point, however, we will see a correction, perhaps a sizable one.  After all, even strong bull markets never move up in straight lines.  I would not be surprised to see gold stumble - falling back $100, $200, or even $300 - before prices begin working their way higher once again." That was my view published on NicholsOnGold.com in late August. Gold has certainly taken a dive - and could stumble further in the days immediately ahead - but I think we will see the yellow metal begin its comeback sooner rather than later, possible in the next few days. This summer we raised our ...

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Dog Days of Summer: Cooling Off for Gold Unlikely

The days and weeks ahead could be tumultuous for gold with the yellow metal's price primed to move one way or the other depending on news from European finance ministers, the European Central Bank, the Greek Parliament and, last but not least, the Fed's FOMC policy-setting committee and Chairman Bernanke's news conference later this week. Technically, gold remains range bound with good support, as we saw last week, between $1515-$1522 and overhead resistance in the $1545-$1555 range.  A break out in either direction, perhaps triggered by news of a more fundamental nature, could signal a ...

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In Brief: The Bullish Case for Gold

Stimulative U.S. monetary policies, irresponsible U.S. fiscal policies, and an uncertain outlook for the U.S. dollar. Despite some hopeful economic indicators here and there, persistent recession-like business conditions - especially the weak housing sector and high unemployment - gives the Federal Reserve no alternative than continuing its accommodative and ultimately inflationary policies. Higher industrial and agricultural commodity prices and rising inflation expectations will promote investment and speculative demand for gold as an inflation hedge. Global commodity inflation is ...

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U.S. POLITICS, ECONOMIC POLICY, AND THE FUTURE PRICE OF GOLD

Gold thrives on political and economic uncertainty . . . and we've got plenty of that now that the Republican Party has seized control of the House of Representatives and narrowed the Democratic majority in the Senate.  What's more, the U.S. Federal Reserve, America's central bank, is adding to the uncertain political and economic landscape as it embarks on another large dose of monetary stimulus. Without a doubt, the new arithmetic on Capitol Hill -- along with the Fed's recent policy shift -- reinforces the bullish case for gold and raises my confidence that gold prices will rise to $2000 ...

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Monetary Policy, Competitive Devaluation, Inflation Targeting . . . and the Future Price of Gold

Suddenly, our long-standing forecast of $1500 gold -- possibly by the end of this year -- doesn't seem so far-fetched . . . and, one by one, many economists, analysts, and investors are ratcheting up their price targets to keep pace with the market. The U.S. dollar price of gold is now up more than 20 percent this year and looks certain to score its tenth consecutive annual increase in a decade.  By comparison, U.S. equities, measured by the Dow Jones Industrial Average or the S&P 500, are up a meager four-to-five percent year to date. No Bubble Here Notably, the yellow metal's recent ...

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GOLD: Summer Consolidatation — Bull Market Alive and Well

Gold prices have fallen sharply in recent weeks from their all-time high over $1265 on June 21st in New York.  By mid-July, gold was briefly below $1180 -- a drop of some seven percent. Faint-hearted gold investors need to remember that bull markets never move straight up.  When they do, it's called a "bubble" . . . and bubbles do burst. Instead, this market is moving up -- and will continue to move up -- in a stepwise pattern with occasional high volatility and big corrections on the road to much, much higher prices in the months and years to come. For the most part, this summer's ...

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Gold and the Double Dip

Many business economists and financial journalists are again talking about a "double dip" or renewed downturn in U.S. business activity.  As our clients and readers of this website know, we've long held the view that the U.S. economy would sink back into recession or, at best, a long period of sluggish growth insufficient to produce any meaningful gains in employment. Longer term, we see years of "stagflation" for the United States and European economies -- with sub-par economic growth, unacceptably high unemployment, and a troubling rise in inflation led by higher prices for many ...

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