My Ultimate Forecast for Gold

This is a special edition of Money and Markets because we want you to have this information before anyone else.

Indeed, Ive been waiting years for this day.

With accelerated inflation now kicking in … with major world conflicts now heating up … and with gold up $26 an ounce just in the last two weeks … Im officially letting the cat out of the bag on my long-term, ultimate forecast for the yellow metal:

Before This Gold Bull Market
Is Over, the Yellow Metal Will
Exceed $2,000 Per Ounce

Why $2,000? One basic reason is thats the level it will have to reach merely to duplicate the same purchasing power it had 26 years ago.

That was 1980, when, in terms of todays dollars, gold reached $2,176.

And that was a time when the demand for gold was far less sustainable than it is today … and the supplies far more abundant.

Is this really possible? You bet it is!

If history teaches us anything, its that no record stands forever on Wall Street. And when it comes to gold, everything I see tells me that day is coming sooner rather than later: I count no less than seven massive global economic forces the tsunamis of the financial world that are already making much, MUCH higher gold prices a virtual certainty.

Financial Tsunami #1
The U.S. Dollar Is Weakening
Around the Globe, Driving
Demand for Gold Sky High

Just six short years ago, the U.S. dollar was the strongest, most stable currency in the world.

But since 2001, the worlds confidence in the dollar has been shaken badly. And with every passing day, more and more banks and investors are abandoning the greenback in favor of more stable stores of value like gold.

The charts tell the story: Since the dollars demise began, gold has risen virtually nonstop.

Even when the dollars decline was temporarily interrupted in 2005, gold continued to climb, evidence that the dollar is only one of several powerful forces driving gold higher.

And now, as the dollar turns down again, gold is skyrocketing at an even faster pace. But as well see in a moment, this gutting of the dollars value still has a long way to go.

Financial Tsunami #2
Exploding Federal Debt
Virtually Guarantees
Stronger Gold Prices Ahead!

Since taking office in 2001, the White House and Congress have transformed the U.S. budget surplus into a bottomless cesspool of embarrassing and unsustainable debt and its getting more horrendous by the year: Last years $319 billion deficit was the third highest in history, and this years is exploding toward the $400 billion level!

All told, the national debt now stands at a mind-blowing $8.2 trillion and explosive increases are virtually locked into the system until at least 2010. In fact, the only way to slow this debt disaster would be to enact drastic and painful economic measures no politician in his right mind would vote for.

Make no mistake: This mind-blowing debt $108,000 for every family of four in the nation can not be managed by simply selling more and more U.S. Treasuries to foreign investors.

Theres only one way Washington could possibly keep this mountain of debt from crushing the U.S. economy: Crank up the printing presses and flood the economy with paper money!

Now, you … I … and every foreign investor and central banker in the world know what that means: A flood of Fed funny money would send inflation soaring!

No wonder Chinas central bankers have announced that theyre using some of their reserves to buy gold instead of dollars! No wonder millions of investors around the globe are shunning the U.S. dollar and turning to more stable things like gold!

Financial Tsunami #3
The Ballooning Trade Deficit
Is Driving Foreign Investors
OUT of Dollars and Into Gold

When the trade deficit soars, it simply means that foreigners are taking in far more U.S. dollars from their exports to the U.S. than we earn from our exports to them.

Today, the trade deficit is a whopping 6.5% of the countrys GDP.

If thats not a dead give-away that the dollars destined to continue collapsing and that gold is destined to continue soaring I dont know what is.

It also means that foreigners who hold those hundreds of billions of dollars have a big decision to make: Should they:

A. Hold their profits exclusively in U.S. dollars which have been declining in value since 2001? Or, wouldnt it be much smarter for them to …

B. Dump dollars and diversify put big chunks of their money into safer, more stable currencies and gold instead?

I ask you: What would you do?

The answer should be obvious: Diversify into gold. And thats precisely what the worlds central bankers and savvy investors are doing.

Financial Tsunami #4
Despite What Washington Says,
Real U.S. Inflation Is Skyrocketing

Since 2001, gasoline is up 49%, beef is up 28%, eggs are up 34%, oranges and tomatoes are up 39% and 31%. The cost of buying a home has more than doubled. Health care costs and college tuitions have gone through the roof.

And yet, shameless officials at the U.S. Bureau of Labor Statistics continue to swear on a stack of bibles that inflation is under control.

How do they get away with that kind of gobbledygook? Simple: The governments math is so convoluted it would make Enrons crooked accountants blush in shame!

Did you know, for example, that if a product jumps in price but Washington decides the quality improved, theyre actually allowed to claim that the price fell?

And did you know that they totally ignore the surging cost of homes and condos, substituting instead the low cost of renting equivalent housing?

Then, they factor those artificially lower prices the prices that nobody is actually paying into the consumer price index, announcing that inflation is under control.

If you think even for one moment that inflation is really at just 3.4% a year, youre kidding yourself. Your cost of living the price you pay for everything from housing … to food … to fuel … and to health care … is skyrocketing by double digits!

And thats important to know because during the last officially recognized inflationary crisis (1974-1980) before Washington began cooking the books on inflation the average annual inflation rate was just 8% per year.

And during that period, gold prices rocketed more than ten fold from $58 to $612 an ounce an increase of 1,055%!

Today, the true inflation is probably higher than 8%. But even if gold jumped only one quarter as much as it did in the 1970s, youd still be looking at a gold price of more than $2,000 per ounce.

Financial Tsunami #5
Wars and Rumors of War
Are Triggering Huge
New Demand for Gold,
The Ultimate Crisis Hedge

Right now, the Middle East, the Persian Gulf and much of the planet is a powder keg on a short, short fuse:

Never-ending, escalating wars in Afghanistan and Iraq … the first-ever election to power of a sworn terrorist group (Hamas) … Irans defiant and arrogant program to build nuclear weapons … anti-Western rioting throughout much of the Muslim world … new terrorist attacks in Saudi Arabia … Pakistan … and India.

Unfortunately, not one of these hot spots is going away soon, and more are sure to arise in the months ahead. All this is terrible news for world security and the global economy and news that can only drive up the value of gold.

Why? Because since the dawn of time, gold has been the ultimate crisis hedge for the worlds governments and investors. The more things heat up, the higher gold prices go.

Financial Tsunami #6
India and China Are Set to Take
Millions More Ounces of Gold
Off of the World Market

China has recently announced that it will plow at least 2.5% of its trade surplus into gold. That equates to a staggering $2.5 billion of brand-new demand for gold every year.

And lets not forget the frenetic pace of economic growth in both China, and India, running at 9.8% and 8%, respectively. Both have only recently fully opened their domestic gold markets to private investors, and India is already among the worlds biggest buyers.

These cultures have a deeply ingrained, emotional affinity for the yellow metal, and a rapacious appetite limited only by their modest yet rapidly rising per-capita incomes.

Remember: Over one-third of the worlds population more than 2.4 billion people live in these two developing economic superpowers.

Watch for soaring central bank demand plus skyrocketing domestic consumption in the worlds two largest nations to add still another major boost to gold prices.

Financial Tsunami #7
Just When These Six Massive Forces
Are Creating Colossal New Demand for Gold,
Worldwide Supply of Gold is Dwindling

Even in normal times, youd expect these six financial tsunamis to drive gold prices into the stratosphere. But these are not normal times.

The fact is, after thousands of years of mining every ounce of gold possible, the planet is beginning to run out. According to U.S. Geological Survey, there are now less than 45,000 metric tons of proven gold reserves left in the ground worldwide.

And thats serious because the above-ground supplies of gold couldnt even begin to satisfy todays exploding demand for the yellow metal. If all of the gold in the world were put in one place, it would fit comfortably in a high-school gymnasium!

Bottom line? No matter how you look at the supply and demand realities, only one conclusion makes any sense at all: I figure much, much higher gold prices are virtually guaranteed throughout 2006 and beyond.

I Repeat My Forecasts for Gold:

This year, you will see $618 gold, minimum. And odds are very high you will see gold as high as $740 this year. In 2007, I would not be surprised to see $1,000 gold.

And before this great gold bull market is over, you will likely see gold exceed $2,000.

Heres what to do …

Recommendation #1. Be sure to hold some bullion, preferably through a bullion exchange-traded fund, such as the StreetTracks Gold Trust (GLD). Each unit represents 1/10th of an ounce of gold. Buy 100 shares, and you own 10 ounces of gold which the fund stores and insures on your behalf.

Recommendation #2. Consider a top-notch precious metals fund, such as the DWS Precious Metals Fund (SCGDX) or the Tocqueville Gold Fund (TGLDX).

Recommendation #3. Go for gains of up to $159,000 with high-powered LEAPS call options on my favorite gold stocks. As with any stock options, the risk is strictly limited to the amount you invest. But unlike most options, you get much more time for the investment to work out in this case, almost a full year. Call us at 800-408-0081.

Best Wishes,

Larry

About MONEY AND MARKETS

MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Beth Cain, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.

Sign Up Free