Top Gold Market Analysis

Where do you expect gold prices are heading now that even Swiss gets to the business of devaluing its currency? $1,800 an ounce?

One major supporter of gold prices is governments around the world getting into a currency war, preventing the appreciation of their currencies so their economies can grow faster. The losers are the people holding these currencies and the winners are investors exchanging the paper money for gold.

The Swiss National Bank press release is available for download below.

If you could please answer one simple question and then we can move on: How are you going to pay up your debt?

In the past two weeks fear spread across global markets and sent volatility to the roof, as investors became more nervous about how governments were going to deal with the debt issue. S&P downgraded U.S. debt in response to the politicians playing last minute game, coming up with no clear plan and the likelihood of returning into recessions.

The situation was more dramatic in Europe. Twenty-one months ago Greece admitted it was broke and yet, there is still no fix to the issue as there is no consensus on who will ultimately pay for it. By joining Euro, Greece suddenly accessed cheap credit and misused it by creating a lot of jobs in a bigger government. They thought their gold membership meant nothing could go wrong.

Jim Rogers likes to keep his investment in commodities, gold and silver. He believes U.S. has serious problems and debt issue is not going anywhere as U.S. is not addressing it. There is no happy ending to this.

America will default, they may not call it a default but they will inflate the currency away. He is short India and long China and gold and if the yellow metal goes down, he is a buyer. Don’t sell your gold until in 10 years or so when the bubble bursts, says Rogers in the video below. He forecasts gold will go above $2000 an ounce.

JP Morgan raises its forecast of gold price from $1,800 an ounce to $2,500 for 2011  after S&P downgraded U.S. debt rating. The firm advises clients to go long commodities, namely sugar due to investment and inflation in Asia. The commodity markets linked to these emerging markets will stabilize relatively quickly, outperforming markets more closely tied to developed ones.

Any day now, the American Dollar might suffer a potentially fatal blow at the hands of the U.S. government and its inability to resolve the debt ceiling/deficit reduction debate. Regardless of what happens on Capitol Hill or if the August 2nd deadline is missed, credit rating agencies will still likely downgrade the US credit rating, which could spell disaster for the US economy and for the U.S. dollar. Side effects include, but are not limited to, a collapsing dollar, rising interest rates and an attack of the bond vigilantes who could seek revenge on the Federal Government and dump their holdings of U.S. Treasury bonds.  For decades, the US dollar has been the safe haven currency worldwide, and, in recent times, the least ugly of the ugly. If the least ugly of the ugly suddenly were to become the ugliest, where can investors turn to seek safe haven and profits?

The answer: precious metals

Gold hits a fresh record high as confidence in paper money is at its lowest. Spot prices touched $1,625.54 an ounce as market gets more and more nervous daily over the lack of a consensus on a debt ceiling deal. US could lose its top credit rating even if a deal is reached. We are seeing a pullback at the technical $1,625 resistance level as mentioned earlier.

Surging dollar is working against gold prices but price of the yellow metal will likely trend even higher as the talks between the White House and Republican Party leaders drag on.