Gold Forecast for 2008

2008 Gold Price Prediction

So what about 2008?

In 2008, my minimum target is $925

based upon a continuation of the trends already in place and mentioned above.We could, however, see a spike to

between $975 and $1025

if, in addition,

1. The credit crisis escalates and the central banks are forced to inject substantially more "liquidity" into the financial system than anticipated; or

2. If tensions escalate to red alert status in the Middle East, or if a decline in U.S. presence in Iraq rekindles religious tensions, the bombings and violence in general (with the consequent effect on relations with Iran); or

3. Supply problems escalate in the physical gold market causing a gold crunch; or

4. If we get another major surprise like we did with the credit crisis in 2007 (Yes, something else could crawl from under the rock);

Note: There could be a sharp mid-year correction in the gold price, if we get a strong run-up from the $810 level in the early months of 2008. However, I believe, in the wake of such a run-up, support is likely to come in the current range or just below. Conversely, we could get an out-of-the-box price spike should we see three or more of the events mentioned above converge with their full ill-effect upon the economy and financial markets. These are indeed dangerous times, more dangerous than at any time since the gold bull market began.

Reflections in a golden eye I would be remiss as a commentator on the gold scene if I neglected to mention the rehabilitation gold has experienced in the public consciousness, not just in the United States but on a global basis. Gold is moving into the mainstream as an evergreen portfolio item, and this will prove to be a very important market development as we move into 2008. To some extent, this rehabilitation has been by default. Washington and Wall Street simultaneously have suffered declines in the public perception for well-known reasons - a situation from which gold has directly profited.

The real benefits to this change of thinking have yet to be realized, and are likely to play out over the long term. As investors make the connection between central bank money creation globally and its ultimate result, price inflation, so too they will make the connection between gold ownership and portfolio safety. It used to be that the same tone set in New York's gold market on a daily basis was the tone that carried through to overseas trading for the rest of the day. That scenario has changed dramatically. Now, it is not unusual to see gold begin a strong move in Asia overnight only to be carried over to the New York session.

This role reversal suggests a global undercurrent in the gold market that wasn't present even a year ago, and should be taken into consideration by all gold investors. There is now genuine worldwide competition for the available gold supply.Some might say I am pressing my luck by publishing a prediction for the 2008 gold market after calling the gold price in the three previous years, and I truly did consider, and mentioned to friends, clients and staff, that this year I might rest on my laurels. However, the trends which have pushed gold to the levels we have all enjoyed over the past several years are even more firmly in place now than they were at any time since 2004. Thus, I am emboldened and find myself in my traditional place this time of year. . . .out on the limb.

***As always, anyone who trades on these predictions does so at their own risk. There is as much chance I will be proven wrong as right. Those who are buying gold for long term asset preservation, though, pretty much view the prediction game for its entertainment value.
Last, consider this:Given the perspective of 100 years from now, analysts might very well find currency inflation the common source for the rise in both the Dow and gold during their respective up-cycles. If currency inflation could take the Dow from 800 to 11,750 during its bull market, why couldn't it take gold from its $270 starting point to $4050? If gold were to achieve a price of $4050, it will have matched the roughly 1500% appreciation of the stock market during its bull phase. That makes the current price an attractive entry level.

Source : Goldseek