July 19th, 2011
03:18 AM GMT
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(CNN) – So gold has broken the $1600 barrier – a significant price milestone.

But as sure as we talk about it this week, we’ll likely be talking about another hundred-dollar price jump again soon as global investors head for safe havens. That’s because 2011 has been packed with crises of confidence around the world – and we may be in for more.

Simply put, crises are to the price of gold as matches are to bottle rockets: One makes the other go pop.

Major European and U.S.-based economic issues have been the fuel behind gold’s latest push since July 1.  Greece, Ireland, Portugal and Italy are dealing with huge sovereign debt issues. Meanwhile, the U.S. faces a partisan stalemate in Washington on the need to raise the debt ceiling to avoid an unprecedented default.

If these problems go unresolved, where would gold go?

Up, up and away, according to Puru Saxena, CEO of Puru Saxena Wealth Management in Hong Kong.

“Gold has now started a new rally and I wouldn't be surprised to see $1750 to $1800 by year end.  By next spring, the price of gold could be even higher.”

And we can thank crises of confidence that have pummeled investor faith. Since the start of 2011, the rising price of gold has tracked political, natural and economic storms.

From late January to March, gold jumped nearly 8% as mass uprisings in the Arab world raised fears of oil supply disruptions around the world.

In the month following March 11 – the day of Japan’s historic quake and tsunami – gold rose more than 10% as markets digested the shock to the world’s third-largest economy.

And from July 1 to today, as deadlock in Washington and debt-solution delays in Europe continue, the price of gold has risen yet another 8%.

Just three months ago, on April 20, gold hit its last hundred-dollar barrier of $1500 an ounce. If more crises of confidence hit in the second half of the year, then Saxena’s forecast could come to fruition.

Here’s one scenario that’s not far-fetched at all:

If the U.S. debt ceiling isn’t raised by August 2 – the date when the U.S. would default on its interest payments – global markets would shudder and gold would rise. That would precipitate a U.S. downgrade by credit ratings agencies – and gold would rise. Moody’s and Standard & Poor’s have already put the U.S. on review. On top of that, there’s talk of yet another round of quantitative easing in the U.S. – QE3. That additional liquidity would further weaken the dollar … and gold would rise.

Adds Saxena, “As long as governments continue to bail-out the insolvent and central banks continue to print money and keep interest rates artificially suppressed, precious metals should continue to appreciate.”

So, is it too late to jump into gold before gold takes another jump?

If you’re a bear and believe world financials will get worse before it gets better – and you have $1600 an ounce to spare – then you just might have your answer.



soundoff (34 Responses)
  1. paul kwiatkowski kasper

    http://www.artcamp.com.mx straight from the heart of Taxco, Guerrero Mexico

    July 19, 2011 at 4:12 am |
  2. TheTruthis

    'They will throw their silver and gold in the streets, neither will be able to save them...' prophecy for the 'times of the end' – Ezekiel chapter 7

    July 19, 2011 at 4:12 am |
  3. UrgentWarning

    Gold will not save anyone from (financial) Harmageddon:
    Proverbs 11:4 "Riches do not profit in the day of wrath, But righteousness delivers from death. "

    July 19, 2011 at 4:18 am |
  4. EndGame

    ....and a serious word for the people on Wallstreet from Psalms 73:

    verse 4: 'the wicked are getting fat .... 6 their hautiness and violence envelops them ... 8 about d e f r a u d i n g they speak in an elevated style ...18 sureley on sliippery ground is where God has placed them ..19 O how they have become an object of astonishment in o n e moment, how they have reached their end and have been brought to their end through sudden terrors!'

    July 19, 2011 at 4:31 am |
  5. jim

    by next year it be 2400

    July 19, 2011 at 4:55 am |
  6. Reg

    Back in medieval times a gold coin would get you a decent room and square meal for the day. Not it's credit. Who needs gold, if you got plastic! Wear your plastic sport watches, throw out the golden rolex. Oil (from which plastic is made) is the real gold now. That's why countries are fighting like savage dogs over a piece of bread for the Arctic oil fields.

    July 19, 2011 at 5:00 am |
  7. Colmery

    Supply and demand factors for gold are not so complicated. Demand is mostly driven by the expectation that central banks will continue to hold it as a reserve instrument. Supply of new gold would be sensitive to the price of capital and energy if the margin between cost of production and market price was not so huge. In reality the central banks control it all and the current crisis over the value of currencies may well be the catalyst for rapid change. That change could be that the banks agree to complete the implementation of the Bretton Woods agreement in order to halt the trend towards the storage of wealth outside currencies, which are devaluing. Holding gold at $1600/oz is not without risk.

    July 19, 2011 at 5:33 am |
  8. Omar, Riverside, California

    It is no suprise for me to read some comments and find only one of any value.
    Colmery thank you for a nice comment. I agree with you by the way.
    For the rest of the nutters especially the religious ones. At least show some educational background rather than bible thumping. The end of the world has been predicted by bible thumpers on a yearly basis. Give your herder religion a rest on these boards. Or at least organize so only one of you bible thumpers comment per story. At least that way I do not have to skip so far down to see real comments.
    Besides if you truly believed the words you preached then you would be living in the forest having given away all your possesions and money to the poor. You hipocritical morons. You disgust me as much as the environmentalists that still live in big houses and drive polluting cars. True environmentalists would be minamalist living from the land with the land. Not in a condo or house, and definitely not wearing clothes they did not make themselves.
    I myself do not believe in herder religions.
    I myself see the welfare of mankind above those of animals.
    I myself will not care what you say for it is clear that you have lost hold of your senses and deserve to be locked away in a mental assylum.

    July 19, 2011 at 7:05 am |
  9. AliJ

    Dump the bucks now before they are no more than worthless piece of paper

    July 19, 2011 at 8:05 am |
  10. Mystic

    S100 billion worth of Gold found hidden in a secret vault in an Indian temple few days back. Such hidden vaults exist in thousands of other temples also. The Gold was hidden in temples so that they would not be looted by others for fear of God.

    There has been no qualitative change in man's thinking; we feel about our neighbors just as the frightened caveman felt towards his. The only thing that has changed is our ability to destroy our neighbor and his property.

    July 19, 2011 at 10:18 am |
  11. American Joe

    Greed, greed, greed! That is what we have become. From the small to the big man we all have the mentality now that we deserve to be rich. Gone are the days when people would endeavor despite "the margin" (of profit).

    July 19, 2011 at 11:24 am |
  12. Kelly

    The newest way to make a killing in the online world is here.

    Do the rich want you to know about it? ABSOLUTELY NOT!

    Find out what they are hiding.

    Google the term "SIMPLE STOCK CASH" and click the very first site. Go right to the penny' stock page to see what the rich do not want you to know.

    July 19, 2011 at 11:28 am |
  13. TheBenBernank

    $12,000 but will probably overshoot to $16,000

    July 19, 2011 at 12:13 pm |
  14. Steve Thompson

    Simply looking at the fundamentals of the world's sovereign debt issue, particularly the stalemate over controlling America's debt, should send gold spiralling ever higher.

    While “men” of both Parties press their partisan political agenda on the debt talks, the non-partisan Congressional Budget Office has already examined what could happen if the debt continues to rise. Here’s a quote from their document:

    “Interest payments, which absorb federal resources that could otherwise be used to pay for government services, currently amount to more than 1 percent of GDP; under this scenario, they would rise to 4 percent of GDP (or one-sixth of federal revenues) by 2035."

    Here’s what could happen to the United States finances if the debt continues to increase or if interest rates increase:

    http://viableopposition.blogspot.com/2011/01/interesting-look-at-interest-on-us-debt.html

    It’s well past time to settle this issue.

    July 19, 2011 at 12:22 pm |
  15. South African

    I agree that buying at $1600/ounce is DEF. risky, but that said, I doubt that the gold price is likely to appreciably drop in the next 12+ months, not with the many economic instabilities faced by the 'west' which is likely to linger in even the best case senarios, thus at the very worst, you may find your gold investment not substancially growing as some may predict, but then on the other hand having diversified away from a potentially weekening dollar may be the real prize here, so all in all I would say buying in is a prudent measure that is unlikely to go very wrong? Then again, I am no financial guru, just some thoughts... As for the religious zealots... please continue to spread your mania and procreate, it's good for the gold price ;)

    July 19, 2011 at 12:33 pm |
  16. goldilocks

    Simpletons.

    Within the box you toil, for the next uptick of the value of gold.
    See beyond your sphere of gain, for the walls are crumbling and whence comes pain.
    Modern the man who walks without pause into the maelstrom of promises falsely made.
    Science cannot measure the implosions of social order.
    Did you count your ounces carefully? Did you stack them ever-so neatly?
    The weight of your wealth will stand blandly as the earth upon your grave.

    By the way, I bought my gold bullion in February 2010 at $1100 per ounce, knowing this was coming. And my silver in September 2010 at $20 per ounce. But it doesn't give me much comfort, as the gold and silver won't help much in a world gone awry. Good luck, fools.

    July 19, 2011 at 12:37 pm |
  17. Greg Nolan with the truth

    This is a misleading question, the price of gold is not rising but the value of money is dropping. The price of gold is still stable comparing it with the price of oil.

    July 19, 2011 at 12:45 pm |
  18. South African

    As for the oil being the new gold argument, I somewhat disagree with analogy as I think they are strongly related, it's not a question of drop gold go to oil: the oil supply is certainly an issue what with the growing asian thirst and middle eastern instabilities (by no means a new thing), thus the problems with oil are likely to fuel ever more conflics and create more negative sentiment thereby EQUALLY driving up gold prices. So really, both gold and oil are good investments, but i would say gold more so as it grows that much more because of a range of troubles driving up the prices.

    July 19, 2011 at 12:46 pm |
  19. goldilocks

    And by the way again, gold will reach $4,000 per ounce while the ship is yet burning but not yet sunk.

    Learn to swim, and gold won't help you there. Illusions will be dying hard.

    July 19, 2011 at 12:47 pm |
  20. Jeff

    So, when will all these "investors" know when to sell their "precious metal" and who will have the money to buy it? When North Korea or Iran announces that their scientists have mastered the process of turning lead into gold, people will be left holding nothing but lead.

    July 19, 2011 at 1:01 pm |
  21. Onefineham

    You can see clearly where the money has gone here:
    http://forex-signals-trading.info/88/exchange-rate-swiss-franc-history/

    July 19, 2011 at 1:04 pm |
  22. Kay Jones

    Some of the Indian businessmen I have talked to says it might go up to USD2,100.00 come December 2011.

    July 19, 2011 at 1:33 pm |
  23. Anthony

    Why do comments on CNN reports about world crises almost always begin with bores predicting the "end of times" and quoting endlessly from the bible? These idiots usually can't even spell – i.e. they can't even copy passages from their precious text correctly. It seems that the main problem in the United States is the poor education system that produces illiterate drama queens whose hobby it is to misquote passages from a text written thousands of years ago, which of course predicts everything from tooth-ache to "Harmageddon". "Urgent Warning": Beware the half-wit with an internet connection and a proselytising mania.

    July 19, 2011 at 1:38 pm |
  24. 1alan1

    Well as the economy collapses gold will go higher. I suspect when martial law is declared it will reach 10k an ounce.

    Religion is a tool to keep the poor peasants from revolting while they are being exploited. Its OK to be poor because god will give you god money when you die, or virgins or whatever. I believe religion is to blame on why the southeastern US is so poor.

    July 19, 2011 at 1:55 pm |
  25. Paul Johnston, PhD Economics

    The REAL TRUTH is there are NO COUNTRIES anymore, ONLY CORPORATIONS who buy and OWN OUR POLITICAL PARTIES & LEADERS worldwide. The only answers is– REVOLT!! & STOP VOTING FOR THESE SAME CORRUPT POLITICAL CRIMINALS! – Obama, Sarkozy, Merkel, Cameron are included in this secret financial cabal!

    STAND UP & FIGHT! - BECAUSE THEIR PLANS ARE TO MAKE SLAVES OF YOU!!!

    July 19, 2011 at 2:23 pm |
  26. Tom

    "If the U.S. debt ceiling isn’t raised by August 2 – the date when the U.S. would default on its interest payments – global markets would shudder and gold would rise." It's going to continue to rise anyway over a longer term. Eventually, as in the last great depression, the price of an ounce of gold will probably meet the DJIA figure, as it did before. This would not be the first time in history that the U.S. defaulted on its debt obligations. It has happened a few times before and we survived, but anyone who has bothered to study the history of money in this country already knows that. It's unfortunate that so relatively few people know of or understand the historical role that gold and silver have played in economic exchange during the past 5000+ years and why it continues to play essentially the same role, beyond its industrial use, as a store-of-value in exchanges. It is even specifically referenced in the U.S. Constitution with regard to our monetary system, though adamantly ignored by politicians and the courts. Like baseless fiat currency? Keep on putting your wealth in it and may fortune shine brightly upon you.

    July 19, 2011 at 3:53 pm |
  27. Nuno

    Gold will go to the MOON !

    July 19, 2011 at 6:15 pm |
  28. vkmo

    Top gold producing country is China, thanks to strong contribution from Tibet. Communist red china is getting richer every day. Here are 2009 figures:

    Economist estimates for 2009 (kilograms)
    1 China 320,000
    2 Australia 210,000
    3 South Africa 210,000
    4 United States 205,000
    5 Russia 205,000

    July 19, 2011 at 6:29 pm |
  29. antireligion

    @religious nut jobs. Fist I am sure that the only reason you are quoting scripture is because you don't own gold. I also think your fake. Your quoting scriptures although entertaining hardly qualifies you to one determine the true meanings of the scriptures. To quote a regular religious saying to describe irrational behavior "god works in mysterious ways."

    On to the matter at hand. Gold will continue to go up over the course of the long term. Even though it is being surpassed silver in industrial uses due to the fact that silver is a better conductor for electronics Gold still holds a reputation of being beautiful and rare. Most of the gold reserves in the world are under wildlife preserves so this will insure that a minimal above ground supply is accessible.

    Mind you I am not an expert here by any means. this is my opinions based on the research I did before buying into both. I did not however buy into them to make money i bought into them to protect my money. Even if it goes down I would still have preserved more value than if i left my bills in a bank to deteriorate thanks to inflation.

    July 19, 2011 at 6:48 pm |
  30. EndGame

    ....and still: gold or silver will n o t help you when the financial, economic, and social order collapses.

    July 20, 2011 at 4:14 am |
  31. UrgentWarning

    @ Anthony and 'spelling'
    It's always good to check before you rant. Armageddon, Harmagedon, or Harmageddon = all OK spellings for the Hebrew word appearing in Revelation 16.16.

    July 20, 2011 at 5:06 am |
  32. EndGame

    The biggest gold production nowadays is in Tibet.
    Interesting fact.

    July 20, 2011 at 7:14 am |
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