reply posted on 28-5-2010 @ 12:03 AM by grimreaper797
Gold will go up. It will go up at a slow pace, maybe see some small declines. But overall its going to pick up at a faster rate.
It will be stifled by some of the smarter investors who will move to dollars as the euro continues to decline. The euro declining will prompt
investment into dollars, as well as gold, so it will only stifle growth in gold, not cause a decline.
I would bet gold will hit 1350 before bubbling from anywhere to 1600-1800. Higher is possible, but I think by 1800 the bubble will pop.
There will be a couple causes for this. One of the smaller causes will be be growth in oil demand. This will lead some investors to oil instead of
dollars, and gold will profit from this decline in dollar demand. Second, China is going to place further restriction on their economic growth to
limit run away inflation. This will result in a hurt demand for dollars and euros, that will push people into the oil and gold markets.
The biggest reason will be investors that shouldn't really call themselves investors. These are people that simply don't understand market
fundamentals, and will subscribe to the idea that a fall in demand in dollars must mean that the currency is devaluing and they should invest in gold
which they believe to be a solid rock to lean on. They think gold is a constant, and they are wrong. They will buy and hold gold as though it is a
sound investment, even though it gives no returns, and the only way you make money on it is by other people following the same idea.
This is going to cause a big problem. More so then we have ever seen in the past. It is becoming easier for inexperienced people to control their
investments directly, when they don't have the know how to navigate the market. With computers, they can cut professionals out of the picture
When you think about it, it is a major cause for the previous two bubbles. Underlying factors convincing people to get into investments more complex
than they understand, and other investors seeing this opportunity and following suit. The promise of fast money is too good to pass up, and they
follow the herd. A few will sell at the peak of the bubble like a smart investor would, while many get burned.
Gold will soon promise fast money, and will draw the herd in. 2011 will be a hard year for Gold, maybe even the end of 2010, though doubtful.
There will be a great deal of growth in certain markets though. Gold, oil, and the dollar will all experience growth this year, with gold leading it
out. The dollar, though it will suffer some decline as a result of rise in demand from certain commodities, will still experience growth because
international demand for dollar reserves will rise as the price of oil rises back up.
In other words, there are certain things dragging the dollar down(china, debt concerns, gold demand perpetuating itself, etc.), and certain things
boosting the dollar(euro collapse, oil rising causing reserve demands, overvaluation of stocks in retail and banks, etc.) though I feel overall the
dollar will rise not fall.
Once the gold bubble collapse, there will be either A. a strong investment in the dollar or B. a strong investment in the market.
I am going to bet A. because I think the overvalued retail and financial sector is going to weigh down the aspect of long term reliability in any
specific company. I think bonds will experience a boom because 1. the markets will seem unstable 2. other major currencies will be having troubles
(some major) 3. oil will not be a place for investing with the market taking a down turn 4. the government will need to raise money with china trying
to slow growth while increasing the amount of debt the government takes on.
To make it simple:
Invest in gold till the bubble is in full swing, sell it and buy bonds before the bubble collapses.
My time frame for a gold bubble collapse is no sooner than December 2010 and no later than May 2011.
Do not invest in oil. It's profitability will be short lived. Though it will experience gains, by the time the gold bubble pops, oil will be going
nowhere but down.
Short term buys would be gold and oil, both should be sold before the beginning months of 2011 for bonds.
Ill edit to say there is the possibility that this could go slower than I expect due to government decisions to try and stall certain economic down
turns that are in the workings. I still believe the same thing will happen because nothing indicates anyone has learned anything from their mistakes.
It may take LONG for this bubble to kick in. I'm expecting this bubble to spark before the end of summer as the Euro succumbs to its inevitable
[edit on 28-5-2010 by grimreaper797]