In my opinion, there are three scenarios that could occur in the coming years when analyzing the global economy – and all three have the potential to offer bullish environments for the price of gold. [Let me explain the first and most likely reason.] Words: 660
So says Matt McCall (www.MatthewDMcCall.com) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. (This paragraph must be included in any article re-posting to avoid copyright infringement.)
McCall goes on to say, in part:
Scenario #1: Modest growth for the global economy. The developed countries such as the United States and Western Europe will grow by approximately 2.5 percent with the emerging markets slightly higher. This scenario assumes the worst is behind us in Europe and that no “black swan” events will occur in the coming years. [For me it is the] most likely scenario.
If this is the case, it will prevent the Euro from a further decline against the U.S. dollar. Therefore, the recent move higher in the greenback will be short lived [for the following reasons]:
- The long-term chart of the U.S. Dollar Index shows the index has been in a downtrend for a decade.
- The government has a strategy to increase exports substantially. The only way to achieve their lofty goals would be to keep the value of the U.S. dollar down.
Positive Effect on Price of Gold
- As the U.S. dollar falls, it benefits commodities that are priced in the currency. In particular, the price of gold will move in the opposite direction of the U.S. dollar.
- A strong, yet not too robust, stock market and economy will keep investors involved in the game and gold should benefit from decent returns in the stock market as investors search to build a diversified portfolio.
Possible Adverse Effects on Price of Gold
- If inflation remains tame and the geopolitical situation does not escalate from current levels…investors will begin to move cash from money markets into equities, which will then lead to investors selling gold in favor of stocks and funds.
- If stocks are performing better than the yellow metal hedge funds will be forced to sell their gold holdings and rotate into equities to keep up with the market. The mass selling of large funds could create a panic and push gold prices lower.
More to Come
In the coming weeks, I will focus on the other two possible economic scenarios that include:
Scenario #2: Robust global economic growth and
Scenario #3: A global meltdown that leads to a double-dip recession.
Believe it or not, both scenarios offer the best opportunity for gold to hit the lofty predictions that many are making. I will also offer up my personal predictions on where I believe the price of gold will be in the next few years. [Read Update: 51 Analysts Now Maintain that Gold is Going to $5,500 – $6,500/ozt. in 2015! for where others think gold is going.]
Finally, it is important to talk about potential black swans and how they can affect the price of gold. Discussing a potential geopolitical disaster that could affect the global economy is a must. Make sure to check back each week for more on the future of gold and why the odds point to higher prices.
*http://www.ibtimes.com/articles/314112/20120314/gold-price-predictions-dollar-modest-growth-double.htm (To access the article please copy and paste it into your browser.)
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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