The notion that gold has peaked and will stay steady or head to the downside is not very likely. Of course it can never be determined which way it goes with certainty, concerning gold or other commodities but the economic conditions that prevail and will be with us for some time, point to a rise in gold prices. At this juncture gold has reached the $1200 area and above.
The industrialized countries fearing a second downturn have interest rates at record lows, except for Australia. Their central banks keep stimulating the economy by printing money and buying government bonds. This has cheapened the value of money.
There is a bit of deflation at the present, but inflation will rear its head in the future. Gold rises in price during inflationary times as a hedge against the fiat currency of each nation. What is not commonly known is that even during a deflation, gold tends to rise.
There will be times when gold will drop in price, but it will continue to rise through the foreseeable future. How high it will go cannot be ascertained, but gold has plenty of room on the upside in which to move. People want to be sure they are hedging against the decreasing value of their dollars or other currencies such as the British Pound and Euro. Gold will always have a value unlike paper currencies.
When and if a hyperinflation-like spiral arrives gold will rise dramatically. People want to be sure they have something of value left, which is their gold. In addition should a social breakdown occur, gold might be one of the few commodities accepted for food and fuel.
From the beginning of time people have put their faith in gold instead of currencies put out by kings and governments, which they manipulated. Inflation is nothing but a tax and governments inflate currencies to get more taxes in a “back-door” manner.
Gold will rise at least to the $2000 mark as many knowledgeable economists predict. Others see a relationship between equities and gold turning into a 1:1 ration. This means that when the Stock Market in NY drops to 7000, gold will be worth $7000 per troy ounce.