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Gold is poised to continue its recent increase
June 30, 2008
Blanchard is extremely bullish for the second half of the year. Gold is poised to continue its recent increase and will likely pass the $1,000 mark at some point in the next few months and then hit $1,150 by the end of the year.
Inflation and a weak economy both play very well for gold. During inflationary periods gold is an asset that protects and builds investors’ wealth. The weak economy, which Blanchard predicts will continue for quite some time, will weigh heavily on the Fed and likely lead to very few if any rate increases by the end of the year. This paired with other countries’ central banks tightening, will push the dollar even lower.
Rising oil prices will also help gold. The metal will benefit from oil's high prices, which have stemmed primarily from supply and demand fundamentals. While a slowing global economy may hurt demand, the world relies too heavily on oil and demand will not curb enough to push the price back to more manageable levels.
The escalated Middle East tension will push oil and gold higher in the near term and will likely be unresolved anytime soon.
Mining production continues to slow, so the majority of the supply hitting the market is not newly produced gold, it is coming from existing supply.
Demand for gold will also be increasing towards the end of the year as cyclical demand increases.
Taken all together, Blanchard predicts new records for gold this year, and we believe investors still have a great opportunity to protect and grow their net worth by diversifying into gold at current levels.
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Copyright © 2009 Blanchard and Company, Inc.
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