If our Washington pols strike a debt reduction deal what will be the impact on the price of gold, if any? Gold is being heavily bought in Asia, particularly by China and India. For them, it's more of a commodity than an investment. Over here it seems that owning gold is a hedge against inflation and a means of wealth preservation in the face of the chaos in Washington. But if Washington settles on a deal, what will be the impact on the price of gold? A lot of force factors go into the price of gold.
very simplistically: debt reduction = dollar strengthens = pog drops
however, i believe debt reduction measures would be coupled with a "temporary" increase in the debt ceiling, i.e. QE3 under a different guise. also, as you point out, Asia knows gold is the only real way to preserve wealth as US sorts itself out via the printing presses...that should dampen any pog declines.
Look at the UK...the "austerity measures" were announced as part of the 2010 election, but don't begin until 2012! In the interim, the fiscal deficit has continued increased...but the rate of increase of slowed - and i guess that's something! lol.
i'm anticipating more "nervousness" in the run up to the US announcement (August 08?)...in other words, another excuse for a sell-off in the wider markets and a reload. Then, when the announcement comes...the mother of all rallies in pog...first stop 1700...then 1850 by Q1 2012.
Then sometime later next year / early 2013...US starts to postpone debt reduction measures and BRICs hint for the first time that perhaps there should be a partial return to the gold standard - kaboom - gold heads north BIG TIME.
Hi skip glad to see your post and very timely too. I have a buddy that works in the securities profession(options, stocks, etc) and from what he has been saying to me ties in very closely with your analysis on this post. He is expecting the fed to say all is ok in the economy in order to avoid QE3. This will give banks and other high profile companies the first chance to unload their metal stocks, then out of the blue they will announce QE3 is needed when the economic reports show the economy getting much weaker(around end of summer). This will cause a mass flood back to the Precious metals like you have never seen before. His advise to me was to load up on any pullback you see coming ini the precious metals because the next couple of months could indeed be very choppy. Although he doesn't buy the individual stocks and buys only the sectors benchmarks(ie. SLV or GLD), he believes Gold and Silver are definately going much higher. The interest on the massive debt alone they cannot repay.
Hang tight everyone, the ride up has not started yet. I am looking for a good opportunity to load up on more shares of NGD.