First with Financial Comment from Arabia

Gold’s next move is down says $5,000-an-ounce author

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While firmly sticking to his forecast of $5,000 gold within the next few years, ArabianMoney editor and publisher Peter Cooper can see a three-month price correction as the next move for the yellow metal and its best friend silver.

Of course books are frequently published just as major changes of direction occur, and markets do not always move on cue as authors would like. That does not necessarily invalidate a price theory but it certainly does test it.

Stock market crash

The devil in the brew for gold right now is an imminent correction in global financial markets. For the latest predictions there are several articles on this website ( click here and then here).

Late in 2008 gold bugs saw their precious metal dragged down with other global financial markets in a big sell-off. Basically good assets were sold down with the bad to meet margin calls by investors.

It will most likely happen again. And if this sell-off proves to be as strong as ArabianMoney suspects then gold will also be a big loser. It is even possible that we might test the lows of last April, and fall below $700, although $950 is a more reasonable downside target.

But that really will be the ideal moment to stack up your vault with gold. For the $5,000 target is still there and the bounce back will be very strong with money rotating out of bonds and back into precious metals and particularly associated equities.

Ultimate bubble

Presumably general equities will also offer some rebound potential from these summer lows. But if George Soros and other hedge fund investors in precious metals are right then this is the next and ‘ultimate bubble’.

That leaves investors with little alternative but to park their money in US dollars and bonds before investing in precious metals this summer. Even the normal seasonal upturn in precious metals in the autumn would make this an excellent trade but as readers of ‘Dubai Sabbatical, The Road to $5,000 Gold’ will know there is far more money to be made.

However, whether holders of gold and silver should now sell up and try to buy back at a lower level is always a difficult question. Getting market timing wrong is always a consideration, and with some of the world’s great hedge fund managers presently big hoarders of gold you have to wonder if they know something that is not yet apparent.


Written by Peter Cooper

March 21, 2010 at 1:44 pm

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