Capital Gold Group Report: Forbes.com's Curtis Hesler - Gold to $1,600

by Curtis Hesler

Forbes.com Newsletters

WHY BUY GOLD?    Gold is underbelieved, but it is finally gaining serious investor attention.  China still wants to be a global player.  In order to come up to speed with the rest of the central banking world, it is estimated China needs to purchase 2,000 to 3,000 tons of gold.  China's sovereign wealth fund has over $1 trillion to invest, and it has been stockpiling commodities - including gold - all the while the Chinese and Indian middle classes have been accumulating gold like mad. 

Deep problems are developing in the U.S. credit markets.  The housing industry is crashing while debt problems are infecting the general economy.  Consumer demand is beginning to suffer.  Consequently, the U.S. is entering a recession that may well last longer and run deeper than most think.  The average citizen is being hoodwinked about the seriousness of these problems by media sound bites while the purchasing power of their dollars dwindles.  However, knowledgeable investors are not so easily distracted, and gold is becoming more enticing as a financial safe haven and inflation hedge. 

One thing you can count on is that as long as the Fed continues to push interest rates below the true rate of inflation and balloons the money supply, gold will be attractive as an inflation hedge.  While demand for precious metals is increasing on a global scale, supply is being severely curtailed due to played-out reserves and South African production being shut down for a lack of power.  South African mines will not be up to full production again for several more years, and they account for a full 20% of the world's gold supply.   

At the root of it all - underlining gold's continued advance to $1,600 is the declining value of the U.S. dollar.    Essentially, when you see some high school kid get a multi-million dollar contract to play basketball, you know that your dollars are becoming worthless.  As the U.S. dollar falls, gold will rise; and the dollar is about to be taken out and shot ... again.

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