We are entering the month of January, named for the two-faced Roman god Janus who looked both backward and forward. This is the time to look back on one of this writer's predictions and ahead to what might be next for the price of gold.
Early last September I wrote, " I'm sure there are lots of writers, investors, analysts and miners who would not be surprised to see gold at US$2,000 per ounce in the next four months." On Sept.4 and 5, the price was US$1,895 per oz, an all-time high.
Perhaps this writer was overly optimistic. I had not reckoned what effect the European debt crises would have on the gold price. Nor could I predict the longer term effects of the Japanese earthquake, the wrangling of lawmakers in the United States over that country's ballooning debt, or the effect of world opinion on rapid political change in the Middle East.
Now gold is trading more than $300 lower than it did in September. The price on Jan. 2 was US$1,565 per oz.
The big question is: Where is the gold price going now? The future is far from clear.
To support the idea that gold will continue to rise, we could look at the last 11 years of rises. At the beginning of 2000, the gold price was at the now unthinkable US$282/oz, where it had more or less been for the preceding decade. In 2002, the price rose from US$278 to US$347, and it continued to rise steadily until it reached US$870 at the end of 2008. The major effect of the global financial meltdown that began that year was to push the gold price higher: US$1,088 at the end of 2009, US$1,406 at the end of 2010 and US$1,531 at the end of 2011. That's a very good run. Why would anything change?
The more nervous among gold watchers can think of several reasons to be pessimistic. There are suggestions that certain African countries will nationalize their mining industries and that the United States will again confiscate gold from its citizens in a move that would allow it to suppport a global financial recovery. Jewellery demand in India is slowing. And maybe John Soros (one of the world's leading gold bugs) knows something we don't - he has been selling gold.
If anyone knows for sure that the price of gold will be in three months, six months or a year, that person could make huge profits. For the rest of us, volatility in the gold market is difficult to out manoeuvre.
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