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Could Gold Climb To $5000 By 2020?

by Michael Locklear

gold going up August 24, 2012 – Are gold prices rising because of the improving economic levels in China and India? Dan Smith, a leading metals expert who is the head of research for standard chartered says yes.

There does appear to be a correlation between the rising incomes of China and India and their increasing demand for gold. Currently these two nations buy more than 50% of the gold sold in the world. Experts have been pointing to this relationship between gold demand and gold prices. Since 2000 the price of gold appears to match the rise in income levels. After more than 10 years this pattern continues to hold true.

In the greatest dreams of the gold bulls, the cycle moving forward this year could see gold reaching the $2000 more per ounce. The optimistic hopefuls see the possibility of gold climbing to near $5000 by the end of this decade. Are the gold bulls living in a fantasyland? Maybe, but then maybe not. Gold prices have tripled since 2005 when the market was called a bubble. If the rate of increase continues over the next seven years, the Bulls may be right.

There is little doubt that the steady rise of personal incomes in China and India have shown to be highly beneficial for the global gold market. If this trend continues and interest rates remain as they are, then the consumption of gold in all forms will rise and grow.

Economies are in flux now and change is the only constant. If trouble outside China and India, in Europe and the United States mostly, results in lowering demand for consumer goods or the US makes major moves toward returning to high manufacturing output of consumer products than the risk of economic slowdown will find its way into Asia and the Indian markets.

In another scenario the Chinese and Indian governments may need to raise interest rates in order to combat rising inflation in their nations. In these events the demand for gold may be diminished quite rapidly. However this seems unlikely based on their history. Experts doubt that these governments will act to negatively impact personal income levels in the foreseeable future.

Even if the future does hold such tightening of money in these nations it would not necessarily diminish the demand for gold overall. Such controls in Chinese and Indian monetary policies could result in improving the strength of their currencies against the dollar and prompt a new growth avenue for gold. Improvements in the Yuan and the Rupee would likely push up the price of gold in US dollars. Either way it’s good news for the gold bulls and their adherents.

In September of last year gold prices hit an all-time spot market high of $1921 an ounce. By May of 2012 the bears were in the woods and the price of gold dropped to $1526 a decline of little over 20%. This week the Bulls are back as the market price for gold increased three times in a matter of days to reach $1670 per ounce.

Investors were hounded for being foolish and risky last year by the bubble advocates who seemed to be right for a while as the price took a 20% decline. Many said the bubble had finally burst. But it looks like the Bulls were running again and the bubble may be the fantasy.

Like so many things in life, both sides feel very strongly about their positions and each can find an army of followers who believe in their evidence. Even the billionaires can’t agree on this one. George Soros got out of gold some years back and now he’s back again. Warren Buffett still doesn’t like gold. Only time will reveal who’s right. Keep watching, this can get more interesting.

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