Gold will achieve new record highs this year - Blanchard

Blanchard and Company's research analysts see gold achieving further new highs in 2011 as little has changed in the drivers which have brought gold to its current levels.

Author: Lawrence Williams
Posted: Friday , 01 Apr 2011

LONDON -

According to coin and precious metals dealer Blanchard and Company's research arm, the continuation of gold's strong bull run through during Q1 2011, with the metal hitting a new nominal high above $1,440 last week, will see more new record highs likely to be achieved this year despite some analysts' predictions that gold will plateau.

"After the economic implosion in 2008, investors are fatigued by negative indicators that show more financial weakness on the horizon and naturally gravitate toward signs they see as positive, but right now that's just not an accurate reflection of reality," says David Beahm, Blanchard's Vice President of Marketing and Economic Research. "In the first three months of 2011, the Fed has printed about half as much money as it did in all of 2008. That's not a sign that QE2 is coming to a halt sooner rather than later because the chart is parabolic." A graphic of the money supply increase is shown below courtesy of the St. Louis Fed, indicating the huge and steep rise seen in the past two years of ‘Quantitative Easing'



Beahm reckons that much liquidity will continue to dilute the dollar's value, keep interest rates near historic lows, and contribute to a financial mess that has buoyed gold investment demand and prices to levels that have not been realized before. He also says there are other factors that will push gold higher, and most of them are likely not going to change in the foreseeable future.

"When you hear economists say they see European rate hikes on the horizon when three EU countries are on the verge of defaulting on their debt with no lenders in sight, that makes me question the accuracy of those predictions," Beahm says. "The U.S. faces a similar problem, but there's an exception - it just borrows money from itself. This will ultimately create a hyperinflation scenario that is extremely bullish for gold."

The parlous financial situation of some of the U.S.'s largest states and municipalities almost parallels the European situation although little is mentioned about this in the financial press.

Add the expansive and expanding tensions in the Middle East and Northern Africa, and the crisis at Japan's Fukushima Nuclear Plant to the mix, and Beahm sees a scenario where gold's status as the ultimate financial safe haven will be reconfirmed.

"At this point, as in the past, investors will continue to look to gold as one of the best vehicles to both protect and grow their wealth," Beahm says.

Beahm's opinion is shared by some other specialist gold analysts who have been pointing out that the financial and political problems which have brought precious metals to the levels they have reached so far are virtually all still in place. The apparent recovery in the U.S. remains a little precarious and it may only take some other major unforeseen event to give gold another sharp upwards kick