Gold may touch $2150 in a replay of the debt-ceiling crisis

In the summer of 2011 the gold peaked at $1913 per ounce due mainly to US debt ceiling crisis. The maximum price was reached even after the debt-deal was finished.

Today Obama was sworn for a second term with 800 thousand crowd attending at the ceremony. In next 5-6 weeks the President will have big problems, because of his own incompetence, combined with a Republican majority in the House. Obama simply denies to negotiate on spending cuts, that means that the only possible move left is lifting the debt ceiling without anything in exchange. But this is almost an impossible move, because it is unacceptable for the Tea-party majority among Republicans. It is even humiliating for them. So even if they surrender under the President pressure, this will happen only after a fierce resistance and as in previous case - in the last possible moment. Till then the uncertainty on markets is guaranteed and this means new and better days for the gold.

At the end of June 2011 the price of gold was about $1500 per ounce. With closing the ceiling-deadline there was a rapid move up of about $400, or 26%. Today the price is a little less than $1700 so if we see another $400 move up, this will mean $2100 per ounce at the end of February or the first days of March. But if we see a 26% increase this will mean may be even $2150 per ounce. In both cases the psychological border of $2000 per ounce will be surpassed.

There is a stable monetary fundament for this. Any price increase needs money. And there is enough money today with the 3 rounds of QE, a round of "twist", permanent low interest rates and similar measures from other major central banks in the world.

So there is money, there are market fears, therefore there are enough reasons for a gold jump.
I think there is an additional reason for going up. I think the gold price was artificially pressed down in past  years and it does not respond enough to the increase of money supply and the real inflation. There must exist accumulated tension somewhere on the market that can explode once the trigger is pulled.

In these days to keep the deeply ruined paper-money system a careful political behavior is needed that in fact the politics can not provide. This means that the system is moldering constantly with a periodic acceleration help from the politics. This means there will be no a political miracle to gain some more time before the skyrocket of the gold price. I.e. today is a good time to buy and wait.

Meanwhile, my previous prognosis to buy at $1660 has already brought some profit with today's level of $1690.

Dobri
Jan 21st 2013


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