Our objective now: To chart the expected path of gold prices in the New Year.

This report also reveals another wild card inflationary indicator that Hutchinson believes will carry gold prices to $1,500 an ounce by the end of 2009.

Two Catalysts For Gold’s Climb

The U.S. Department of Agriculture’s Oct. 10 Crop Production Report said acreage for a handful of staple food commodities has shrunk:

• Corn acreage fell 1.2%.
• Soybean acreage dropped 1.4%.
• Canola acreage dropped 1.9%.
• Sunflower acreage shrank 0.8%.
• And acreage of dry edible beans fell 0.7%.

That naturally translates to higher prices because it squeezes the supply of the particular commodity. And it does so at a time when demand continues to escalate from populations in China, India and Latin America. And higher prices equal inflation.

But Hutchinson – who correctly predicted this last run-up in gold prices – says there’s another catalyst that’s right now inherent in the U.S. economy that could help vault gold prices to $1,500 an ounce by the end of 2009. And it has to do with the much-ballyhooed $700 billion rescue plan.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

The philosophy behind the rescue plan is elegantly simple: By providing a portion of the $700 billion to foundering U.S banks, the Treasury Department believed it could provide banks with badly needed capital, and get them to start lending money once again – jump-starting the economy in the process.

Since September 2007, U.S. Federal Reserve policymakers have cut the benchmark Federal Funds target rate nine times – from 5.25% down to the current 1.0% rate – to increase bank-to-bank lending and bank-to-consumer lending.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

Right now, banks aren’t boosting lending. Instead, they are using the cash to finance buyouts of other banks. Even so, that money will “come out” into the economy in the form of higher stock prices for banks. That will make consumer/investors wealthier, and could make them more confidence in the economy. If they’re more confident, they will spend. As that happens, food prices should begin ticking upward, adding another set of thrusters to gold prices.

“Everybody thinks that because we’re having a horrible recession, we’re not to going have inflation. I think that’s probably wrong,” Hutchinson said. “I think gold has quite good hidden-store value.”

As gold prices increase, count on more investors leaving the sidelines to invest, too, causing the surge in gold prices to accelerate and steepen.

“As gold goes up, it gets more popular and investors start piling into it,” Hutchinson said.

And if gold gets anywhere near the $1,500 mark, sell. Prices that high will likely fall back or plateau as the Federal Reserve begins raising interest rates and strengthening the U.S. dollar, Hutchinson said.

Five Ways to Play Bottom-Basement Gold

Before we get too far ahead of ourselves, let’s first look at five ways to play bargain-basement gold prices.

The SPDR Gold Trust ETF (GLD) – formerly StreetTracks Gold – is a fund whose shares are intended to parallel the movement of gold prices. Since gold prices started falling along with gas prices, SPDR Gold Trust has stayed within a 0.5% margin of gold prices. This exchange-traded fund (ETF) eliminates any investor concern over storage and delivery while giving them exactly what they want – gold.

Toronto-based Barrick Gold Corp. (ABX) has 27 mines, mostly in North America and South America, and is developing or exploring 11 more. With a market cap of more than $20 billion, it has considerably more liquidity than most mining companies. Barrick is primarily a gold miner, but it also has copper and zinc mining operations. As far as investors are concerned, there are two ways to look at that: It’s not a pure play, per se, but then again, this is a company stock, not a bar of bullion. Also, having operations other than gold can help stabilize the company’s bottom line in case problems arise at a gold mine.

Denver-based Newmont Mining Corp. (NEM) is primarily a gold producer with operations in the United States, Australia, Peru, Indonesia, Canada, New Zealand and Mexico. Its reserves are hovering around 86.5 million ounces. Like Barrick, this is a mining stock play, and is subject to market swings – as well as fluctuations in gold prices. That can be a significant tailwind, especially if you believe the stock market has bottomed out or is close to doing so. Hutchinson – forever a value-oriented investor – warned that Newmont might be a little too pricey now. Investors may want to wait for the company’s stock price to settle before getting in.

Hutchinson thinks the best value for a gold mining stock can be found in Yamana Gold Inc. (AUY), another Toronto-based company that’s small now, but has rapidly expanding production.

But for investors who just want gold – not an ETF or stock – the best avenue is an EverBank Select Metals Account: EverBank accounts has a minimum deposit that is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals’ brokers and bullion banks. It offers two types of gold accounts: Unallocated (your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs; the minimum deposit is $5,000), and Allocated (you directly own the gold you purchase, held in your own private account; $7,500 is the minimum deposit here).

Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

We should point out that the publisher of Money Morning has a marketing relationship with EverBank, but that’s because its products are among the best in class.