Behind the Money

Gold to Surge 50% to 'Real' Record?


Gold's resilient trend higher to a record this week has reassured gold bugs and new investors (see ETFs) alike that the metal's secular bull market is intact and could ultimately approach its inflation-adjusted peak of $1901 in 1980.

The latest driver for the metal is the race by countries to devalue their country like Japan today. But everything from the fear of yet another financial shock that has marred the last decade to the May 'Flash Crash' permanently damaging investor confidence in assets they can't physically hold.

"We believe the final high for bullion will turn out to be much higher" than the '80 peak, said Alan Newman, in his CrossCurrents newsletter, which has been ahead of the game in identifying the peril of paper assets and dangers of high-frequency trading. The gold "bear market lasted 21 years and we see no reason why the bull market for gold cannot last at least another few years. Paper assets are definitely not what they used to be."

Gold hit a new record of 1269.70 on Tuesday, up 21% from its 2010 low. The metal drifted today after yesterday's two percent surge, it's biggest since February.

"The fundamental argument for gold is as strong as ever," said Jim Iurio of TJM Institutional Services. The trader recommends the SPDR Gold Trust, as well as the iShares Silver Trust.

The dollar jumped more than three percent vs. the yen as Japan took the lead in the devaluation race by intervening with it's currency for the first time in six years.

"Our view is that competitive currency devaluation will directly benefit the de facto third reserve," said Brian Kelly, founder of Kanundrum Capital.    

The Federal Reserve has done it's part by keeping a zero interest rate policy and buying Treasuries. Goldman Sachs predicted that the Fed may restart an official round two of it's quantitative easing program in November.

"As long as Bernanke is running the Fed and that he and other members think that printing money is the answer to every economic ill, gold will continue to march higher," said Peter Boockvar, chief strategist at Miller Tabak.

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