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"Goldbugs" might be right

Many market commentators are currently bullish on gold, but few as bullish as Cheuvreux, part of Credit Agricole.

The UK-based company recently lifted its 2006 gold price estimate to US$900/oz from US$750/oz in this report. Cheuvreux thinks the gold price could spike to US$2,000/oz, but the reason sounds like a conspiracy theory: that the gold price has been kept low by secret central bank selling designed to preserve confidence in financial markets during periods of uncertainty and keep bond prices up and thereby improve the perception of U.S. monetary policy.

 

Alan Greenspan referred to the power to manipulate the price of gold. He told the House Banking Committee in July, 1998 that "central banks stand ready to lease gold in increasing quantities should the price rise."

While the notion that western governments would conspire to suppress the gold price has not gained widespread support, Cheuvreux suggests organizations such as GATA (Gold Anti Trust Association) mad "gold bugs" and conspiracy theorists, according to the financial mainstream, have been right all along.

Gold is a store of value, and Cheuvreux says the metal's value soars when yields on financial assets decline and the risk of crisis increase.

Billions of U.S. dollars do seem to be sparking commodity price inflation and Cheuvreux says that gold will eventually skyrocket due to its safe haven status. Sprott Asset Management agrees. "Start hoarding" might turn out to be very good advice.

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