Gold Predictions

I bring you six-pack of gold predictions to start off the new year.  A lot of things are coming together to make 2010 a very memorable year.  All six  predictions will affect the price of gold, whether they seem related to gold or not, they are six important gold predictions that will impact gold in more ways than you can imagine!

HAPPY NEW YEAR!

Let’s hope that the progressive juggernaut is brought to a halt in 2010.  Before I get into my 2010 predictions, I want to lay down a few, little publicized, facts that are going to help shape this years action in the precious metals markets.  As has been often mentioned here in the past, gold and the dollar are joined at the hip.  This relationship will continue in 2010.  There are some signs that the relationship is going to get really volatile in the coming months.

The government tends to remove anything from the consumer price index that points in a direction that they don’t want you to go.  In this case signs are appearing that point to budding inflation.  For those of us in the real world inflation shows up in things that we need and purchase daily.  It is really a shame that we cannot all be like our  elected royalty that don’t have to shop for themselves and are not bound by the laws which they create for the lumpen proletariat that they are so superior to!

In inflation is  showing up in  food and beverage prices which  increased an average of 5.6% in 2009.  Sugar and sweets, up 11.8%, cooking oils, up 11.6%, and cereal and bakery up 11.5%.

World oil prices ended 2009 by a return to the $80 per barrel level before settling at $79.62 on New Years Eve.  Crude oil prices surged 80 percent from a year ago based on perception that the global economy was on the mend, with Europe, Japan and the United States showing signs of emerging from the great recession.  Europe and Japan, possibly, but the U.S.?  I have my doubts on that score because I am in the double dip camp on the U.S. recession.

2009 saw medical care increase an average of 6.7%, with hospital stays up 14.0%. Just wait until the full affects of  Obama Care are felt.  It will make you long for the good old days that these numbers reflect.  One sixth of the U.S. economy is to be run with the same expertise that the U.S. Postal System displays.  National Health Care will be the death knell of the Great American Experiment!.

The cost of tuition at private schools, the only place that you can get a real  education as opposed to what poses as education in the government run indoctrination schools,  rose 10.7%.  Books and supplies for schools were up 14.9%.

Speaking of public schools, The Washington Examiner wrote this about the public schools in Washington D.C.

Educating a public school student in the Washington, D.C., region costs taxpayers about 45 percent more than it did in 2002, according to district budget figures, with that robust influx of dollars funding only modest gains in student performance.

The region’s per-student expenditure was about $14,240 in 2009, using comparable numbers from D.C. Public Schools, Montgomery and Prince George’s county schools, and Fairfax, Arlington and Alexandria City schools. In 2002, it was about $9,800.

In-state tuition at Maryland and Virginia’s public universities was about $8,100 and $9,500, respectively, for the past school year, although out-of-state students subsidize the cost.

Where else can you pay more and get less than with public schools?   Oh I forgot, with nationalized health care.

This chart is from 1994-5.  The numbers and the spread has only gotten bigger as government extends its control of education.

“From each according to his ability, to each according to his need!”   (What a sexist statement to be coming from the Progressive Party!)  Socialism guarantees that misery will be shared by all.

Gold is the canary in the coal mine that is the barometer of the health of a nation’s currency.  Gold has reacted to “quantitative easing” and will continue to point out the devaluation of the dollar as it occurs.  The U.S. government, under the progressives, has clearly stated its intention to monetize the debt in order to secure its hold on the reigns of power.  This will guarantee gold’s continued march upwards.  A change in power of Congress in 2010 will slow the progressive’s march to socialism, but dismantling what they have done to America’s freedoms over the last 60 years will take much longer.

A Six-Pack of Predictions For 2010!

1. GOLD is bottoming here!

This prediction starts the year off right now and we will see if I am right very quickly.  I say that we are bottoming here because gold typically does very well from December to April.  When gold breaks out in the fourth quarter it invariably goes on to new highs after an early winter correction.  Gold has corrected slightly over 10% to date.  A new move up should begin in the next two to three weeks.

Gold’s RSI and MACD levels are in a range that indicates a short-term bottom.  Another interesting stat is,   $1,075 per ounce was the height of gold’s first move over 1000.   What was once resistance is now support.  Barring government intervention,  I think $1,075-78 is the bottom of this correction.

2. GOLD will trade at or above $1550 before the end of 2010

I base this prediction on an orderly rise in the price of gold.  If there is a major political event, such as a war or a successful terrorist attack on the U.S. or its allies, the $1,550 will be left in the rear view mirror.

3. SILVER will reach $30 per ounce in 2010

Silver is used more than ever in things that are used every day such as mirrors, batteries, medical devices, electrical appliances, cell phones, flat-screen televisions, laptops  to mention just a few.  As China and other eastern nations grow, the demand for silver in different products grows with them.  Most of the silver in these products is not recycled because of its much lower value.  This makes silver somewhat like oil, once it is consumed it is gone forever.  That will change as the silver prices rise.

Silver is really undervalued versus gold with the gold-to-silver per ounce ratio at 62:1 ($1,105 / $17.75), which way out of whack with the  long term historical  average gold-to-silver ratio of 15:1.  In 1980, this ratio was 17 ($850 / $50) for a short time while the average in the 20th century has been around 40:1. So if the ratio gets close to 40 at today’s gold price, the silver price should be around $27.50 ($1,100 / 40).

4. The progressives (Marxist/Socialists) will lose the House and Senate.

The left in America is outnumbered 2 to 1 according to recent polls.  America voted for Obama because we are a trusting and fair people.  We did not vote for the Marxist/ Socialist policies that President Obama and the progressives are trying to shove down our throats now.  This is not what they ran on, and the American people will sweep them out of power in 2010 because of their duplicity.

America is against the health care take over and they are opposed to cap and tax.  The left has awakened a sleeping giant and they will get swatted out of office in droves in 2010.  The ramifications of the progressive’s brief dance with total power will affect gold far into the future.

5. Oil will trade over $100 per barrel in 2010.

This one is going to be driven by economic expansion in the East or by political events in the Middle East.  Either way, oil is going higher!  Gold will register the inflationary and supply forces that are building in the oil price

6. The dollar will trade at, or below,  .72 before year end!

In 2010, fixed income issues are set to increase from $1.75 trillion to $2.25 trillion. The 1/2 trillion increase will be mainly comprised of heavier borrowing by the Federal Government in the Treasury markets.  The Federal Reserve has only $200 billion remaining in its quantitative easing fund to buy agency debt and US Treasuries.  This means that the Treasury has to sell approximately $2 trillion  worth of debt to somebody which is going to drive the value of the dollar down.

China, Japan and other countries have already indicated that they are not willing to circle the drain with the dollar, so the Fed has only one option available: The Fed will simply need to print more money.  In so doing they are willing devaluing the dollar, leaving gold no where to go but up.

Gold is joined at the hip with the dollar, and this relationship will be amplified in 2010.

There is your six-pack of predictions to take with you into 2010. Take a look at this quick interview with Jim Rodgers (1:10) and you will get his rapid fire take on gold, silver, sugar, cotton,  oil and currencies.

We will revisit these gold predictions at the end of the year and see how things turn out.

I hope you have a safe, prosperous and happy New Year.

Till next time, good luck and good trading!

More Gold Market Analysis:

• Gold And Silver Predictions
• Inflation’s Influence On Gold Predictions
• Arthur Laffer’s Predictions
• Jon Nadler: Bearish on Gold & Silver?
• It is Time for Gold Investing!

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