CANADIAN PERSPECTIVE: Predicting or guessing the price of gold

No one seems to be able to pin down the future price of gold. Predictions are looking a lot like guesses. There are...

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No one seems to be able to pin down the future price of gold. Predictions are looking a lot like guesses. There are so many variables to juggle when making a forecast that it is no wonder analysts disagree, changing their minds as often as they change their … well … underwear.

 

Let's look at some of the headlines that appeared this month.

 

           Gold price to stay high despite shift to equities.

           Gold price drops as investors opt for equities.

 

           Good news from G20 meeting drives gold price down.

           Less-than-good news from G20 meeting boosts gold price.

 

           Gold price up as oil price falls.

           Gold demand down as prices rise.

 

           The price will go to US$1,100 per ounce this year.

           Gold prices are near peak.

           Gold price could fall 20% by year-end.

 

           Gold (and copper) prices on a seesaw.

 

 

"Seesaw" might be an understatement. There are so many variables to take into account when guessing what the price of gold will be a year, or a week, from now. Making the short list are the global financial meltdown, the likelihood of inflation, demand in India, the threat of a new global flu pandemic, and exchange-traded funds (ETF) for institutional investors.

 

Add to that the fact that China has been quietly buying gold, increasing its reserves by 75% since 2003. Does anyone know if Chinese purchases will continue?

 

I don't think gold is a worse investment than it has been in the past, but in today's world news travels so fast that every little economic twitch is reported at light speed. The over-abundance of news allows for different opinions depending on which news-bit a particular analyst has on his mind.

 

Perhaps the level-headed gold investor will profit over the long term. I imagine that person as someone who buys during a price dip and is prepared to hold onto his investment for a year or more. The gold price will eventually go up, it's just a question of when, how much and for how long.

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