“Panic Spike” to Lead to $2,000 Gold This Year

Gold could reach $2,000 per ounce later this year amid a “panic spike,” according to Clifford Bennett, chief economist at Empire Economics in Australia.

In an interview with the Australian Associated Press, Bennett said that “There is risk in the second half of the year of a bit of a panic spike, if you like, as everyone thinks there isn’t enough to go around and starts to hoard…That’s when you’ll really see gold take off towards $US2,000 an ounce.”

Over the next 18 months, Bennett forecasted that the price of gold could hit $2,200 per ounce, and eventually take out its inflation-adjusted all-time record high of $2,300 per ounce.

Bennett cited rising investment demand around the world for the yellow metal as a key reason for his bullish outlook, predicting that “India and China will continue to stockpile gold.”

He went on to say that ”Gold has certainly come back as a respected reserve form of wealth…There’s been some US buying on the back of fears of European sovereign debt, but I don’t think that market is long yet.”

http://www.goldalert.com/2011/07/panic-spike-to-lead-to-2000-gold-this-year/

World's Billionaires Buying Up Gold... Pushing for $5,000 Per Ounce.

5 Thoughts On $150 Oil

Joe Weisenthal | Jul. 6, 2011, 8:04 AM |

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This weekend, Barron's got a lot of attention for predicting another oil surge to $150.

We summarized some of their key points here, though basically it comes down to: strong demand growth coupled with mediocre supply growth.

In a note out today, Oppenheimer's Fadel Gheit and Daniel Katzenberg offer 5 thoughts on $150 oil:

• The last surge to $148 oil was caused by speculation. Another such a move would likely be caused by fears of supply disruption, not strong demand.

• $150 oil would cause $5/gasoline and be a brutal shock to the US consumer.

• $150 oil would almost certainly cause politicians to get serious about a new energy policy.

• The biggest winners: Producers of primary sources of energy, and the companies servicing them. Losers would be consumers, as well as transportation, chemicals agriculture, and food.

Read more: http://www.businessinsider.com/5-thoughts-on-150-oil-2011-7#ixzz1RRf0GuNL

The Path to $5,000 Gold (TMF)

By Alex Dumortier, CFA | More Articles 

July 6, 2011 | Comments (5)

Ever since I showed that gold is wildly overpriced on a historical basis, I have been looking for ways to demolish the conclusion that we are in a gold bubble. Why? That way, I could either reject the notion or achieve greater certainty about it. Now, the ongoing turmoil in Europe has spurred my imagination into constructing a crisis scenario to try to justify today's inflated gold prices.

Turning somersaultsAs the Greek debt crisis has continued to fester, European officials and bankers are coming up with contrived stop-gap plans to put off the day of reckoning. Slowly, ever so slowly, we appear to be headed toward a fork in the road: On one side is Greek default and an ignominious exit from the Eurozone; on the other, Greece becomes a permanent ward of the European Union/northern European nations.

Under a default scenario, the Greek banking system becomes insolvent and would require a recapitalization. As a result, National Bank of Greece (NYSE: NBG  ) shareholders would be wiped out. Not surprisingly, the huge ambient uncertainty has done nothing good for Greek citizens' confidence in the safety of their assets. On Monday, credit rating agency Moody's reported that Greek banks had lost 8% of their deposits since the beginning of the year.

The case of the vanishing bank depositsWhere are these deposits going? Roughly half of the drop is a response to declining incomes, but the other half is "confidence-sensitive depositors ... transferring funds abroad and converting their deposits into gold coins, while others have been placing their cash into bank safety-boxes."  (Emphasis mine.)

The U.S. is insolvent, tooGreece is emblematic of a wider problem: the massive accumulation of sovereign debt in many developed countries coupled with low growth prospects. Need I remind readers that the U.S. faces a debt crisis of its own? The uncertainty concerning the extension of the debt ceiling is the tip of the iceberg; once the total liabilities relating to Medicare, Medicaid, and Social Security are added to existing debt, the U.S. is technically insolvent. Despite the U.S.'s huge advantages, it's no longer possible to rule out a dollar crisis entirely, despite what our irresponsible politicians' behavior suggests.

In its annual report on U.S. economic policy released last week, the International Monetary Fund warned against the possibility of "a sudden increase in interest rates and/or a sovereign downgrade if an agreement on consolidation does not materialize or the debt ceiling is not raised soon enough." In that context, here are two possible scenarios for the U.S. and their potential impact on gold prices:

	Scenario 1	Scenario 2
Description	Crisis Mounting concern regarding the inability of the U.S. government to address the long-term sustainability of the country's finances reaches a tipping point. Concern gives way to fear, then panic, spurring a dollar crisis. U.S. government bonds lose status as the global risk-free benchmark and the reserve asset of choice. Surplus countries and other investors reduce their exposure to the dollar, selling U.S. assets at an accelerating pace and driving Treasury yields significantly higher. The U.S. banking system, including too-big-to-fail institutions likeCitigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) , comes under intense stress, and without a safety net this time (there is no lender of last resort).	Recovery/Muddle-through U.S. government addresses its fiscal position to put it on a sound footing for the long term. The U.S. economic recovery achieves "escape velocity," led by multinationals like Caterpillar(NYSE: CAT  ) , Procter & Gamble (NYSE: PG  ) , andBoeing (NYSE: BA  ) .Employment improves, the housing market stabilizes, and consumer confidence improves. China engineers a soft landing of its economy and allows the renminbi to appreciate. Global macroeconomic imbalances decline.
Hypothetical price impact on gold market	The price of gold explodes to $5,000 per ounce Investors are desperate to own any asset regarded as a safe haven. Unprecedented demand overwhelms limited supply and the clearing price for gold shoots up to $5,000 per ounce.	Gold declines to $500 per ounce The Fed raises interest rates, thereby raising the opportunity cost of holding gold. As investors discount the possibility of another financial crisis as increasingly unlikely, they reduce their exposure to gold. The metal's price reverts back to its historical average price (approximately $500).
Probability	Unknowable/Small (but rising)	Unknowable

Now, for the sake of argument, let's assume we assign odds of 25% to Scenario 1 and 75% to Scenario 2. Under those assumptions, a fair price for gold is (.25)*(5,000) + (.75)(500) = $1,625, a slight premium to current prices. Let me emphasize that I have no idea what the price of gold would be in a crisis of extreme severity, but the number seems plausible and I'm not trying to predict what will actually occur. I constructed this very simple model to get a sense of the assumptions that are necessary to justify today's prices.

"Possible" doesn't equal "probable"As the analysis shows, it is possible to justify $1,500 gold under a specific set of assumptions. In the follow-up article, I'll explain why I remain unconvinced and why investors who own bullion or gold-backed ETFs such as the SPDR Gold Shares (NYSE: GLD  ) almost certainly misunderstand the nature of their position.

Gold Gold ? - Jim Cramer (CNBC)