The optimism in the global and U.S. economies are plunging again, and gold is there to woo people into safety in response to the perceived and real threat to their capital.
Goldman Sachs (NYSE:GS) sees gold possibly reaching $1,300 an ounce in the next six months, based on the U.S. government's response to the weak economy of entering another phase of quantitative easing (printing money). Another factor is the ongoing interest low interest rates.
Goldman analysts David Greely and Damien Courvalin, wrote in a note to clients, “The recent selloff has left speculative long positions in gold oversold relative to U.S. real interest rates." They feel this has “set the stage for a rally to our six- month gold-price target of $1,300 an ounce.”
The Federal Reserve said this week they're going to use principal payments on mortgage holdings to reinvest into long-term Treasury securities in an attempt to initiate growth.
None of this makes sense, as the hundreds of billions they attempted to use to stimulate the economy has already failed, and to do the same thing over again is futile and a waste of time and money.
Spot gold has shot up $17 as of 3:00 PM EDT, increasing to $1,214.90 an ounce. This will continue to be the gold story as the futile attempts by the government to stimulate the economy undermine the U.S. dollar and drives people to the safe haven of gold.
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