How High Can Gold Prices Go During These Times of Market Uncertainty?

The year of 2010 will go down in the history books as a period of financial crisis and uncertainty as markets ponder the direction of future price movements. All eyes have been transfixed on the S&P 500 Index for some indication of what is to come, primarily since most market drivers have settled into direct correlation with the popular index. Gold and the U.S. Dollar, typically inversely correlated, have been dance partners for nearly a year, and have locked on to the S&P 500 index on occasion.

Presently, the stock index has finally broken through its 200-day moving average again, the third time in as many months, but resistance appears to be building as technical indicators signal another overbought condition. Stocks and other correlated market indexes seem to enjoy this sideways motion. Market traders have learned to profit from the predictable swings, but the long-term investor is confused as to where to invest his capital. Invariably, the conclusion reached by many is to invest in Gold where record highs are the norm for this year, as is a continual upward march in bullion values.

Can this trend in Gold prices continue or it just another market aberration brought on by a year of crises and risk-averse capital fleeing to safe havens? For the past decade, Gold has been ramping up in value, unabated by most conditions that have impacted other markets. The recession, whether we are out of it or not, did little to slow down the Gold parade, and its honored status as a “safe haven” has been tested several times in the recent past to no avail. Gold remains impervious to economic data that destroys value on many other fronts.

The following chart provides a longer-term perspective for evaluating present conditions:

This chart suggests that Gold has been in a “recovery” mode for the past decade, making up lost ground on the S&P 500. The price of Gold reached “parity” with the index while the recession was in full bloom and crossed above it in November of last year. Currently, the multiple is 1.12 versus the S&P 500 index, still a bit below the historical average of 1.40. From this perspective, it is easy to argue that Gold has more room to grow

Current Gold prices are due for a slight correction, as buyers and sellers consolidate their positions. Technical indicators, as with the S&P 500, are suggesting that current price levels have run out of momentum, resulting from an overbought status. However, these conditions have occurred four times in the past year, only to be followed by another resurgence in demand.

The surprise for the past year has been that Gold and our greenback have been so tightly entwined together. Traditionally, the two dance partners have been more like oil and water. When one goes down, the other goes up, and vice-versa. The advent of the Euro at the turn of the millennium coincided with Gold’s upward move. As all forex brokers will attest, the “EUR/USD” currency pair bore witness to tradition as the Euro and Gold both strengthened together. That correlation broke down at the beginning of 2010 as concern over debt issues in Europe began to materialize.

If basic correlations have broken down this year, then what are we to believe going forward? A quick review of Gold’s fundamentals may provide the desired insights.

1. Intrinsic Value: Investors the world over appreciate the metal’s ability to retain value and continue to view it as a primary safe haven;
2. Hedge Against Inflation: As recessionary forces wane and recovery plans take hold, interest rates and inflation will surely follow, if only delayed by central bank fears of a return to negative GDP growth. Gold has always been valued as a perfect hedge against inflation;
3. Mining Prospects: Mining interests have had to fight new taxes on their efforts and find new and better extraction methods, but exploration has not suffered, nor discovered any new major deposits;
4. Industrial Usage: Demand is predictable in this area and can only increase as economic recovery spreads;
5. Current Inventories: Despite fear mongering by Gold critics, central banks have no plan or cause to release their stored reserves. Even if they did, China would gladly exchange their U.S. Dollar CDs for Gold today.

While markets and traders alike ponder the uncertainty of economic conditions, the price of Gold continues to set new records and bolster its decade-long upward trend. While technical indicators signal that a slight pullback in price level is in the cards, the fundamental outlook for Gold remains unshaken by the market’s inability to clearly see the way forward. Gold futures on December delivery have shown slight declines, but these are part of the expected correction in price levels.

Citigroup (NYSE:C): $1,300 Gold within Week

If the Federal Reserve announces they're going to resume quantitative easing, Citigroup (NYSE:C) says gold prices could reach as high as $1,300 within a week.

Citigroup analyst David Thurtell said, "If the Fed says next week it is going to do more quantitative easing ... the inflation bugs will have a field day."

That's actually a real possibility, as gold prices have strong support, and the market is looking closely at inflation, government stimulus and central banks to print money again.

These are all coming together, as inflation was reported as higher today, with the core Producer Price Index in the U.S. increasing 0.4 percent in August.

Add to that the expected stimulus and resumption of quantitative easing, and it can't get any better than that as far as something that will drive the price of gold to extreme levels.

If quantitative easing is in fact announced and implemented, gold prices will immediately skyrocket on the news, and it's unknown how high it will go after that, as the perfect storm again is influencing the gold market.

Barrick (NYSE:ABX) Rating Raised by CIBC World Markets

Barrick Gold (NYSE:ABX) had its rating raised from "sector performer" to "sector outperformer" by CIBC World Markets, as higher gold prices are expected to overcome negative factors.

Production at the gold miner is expected to continue to be low, and costs to remain high.

Barrick, who is the largest gold producer in the world, has been pressured by Newmont Mining (NYSE:NEM), which has cut operational costs to far below Barrick's.

CIBC thinks that will change once the broader markets tumble or remain level.

Weekly Results for Newmont (NYSE:NEM), Goldcorp (NYSE:GG) and Barrick (NYSE:ABX)

Newmont Mining (NYSE:NEM), Goldcorp (NYSE:GG) and Barrick Gold (NYSE:ABX) performed in similar fashion throughout the somewhat lackluster week, as all of them plummeted on Monday, remained level for the next three days, and finished the week pushing upwards as gold prices exploded.

Goldcorp struggled more than Barrick and Newmont, finishing the week close to where they started it, while the other two gold mining giants enjoyed gains for the week.

Friday gold prices finished at $1,255.80, rising as high as $1,258 an ounce.

Goldcorp finished the week at $45.42, gaining $1.21, or 2.74 percent on the day.

Newmont ended the week at $61.67, gaining $2.72 on the day, or 4.61 percent.

Barrick finished the week at $46.33, gaining $1.74 on the day, a 3.90 percent increase in share price.

Barrick remains the largest gold miner with a market cap of $45.61 billion.

Agnico-Eagle (NYSE:AEM), IAMGOLD (NYSE:IAG), Barrick Gold (TSE:ABX) Down for Record Gold Day

Even though skyrocketing gold futures prices have been pulling the gold mining companies up with them, as investors seek safe haven for their capital, Agnico-Eagle (NYSE:AEM), IAMGOLD (NYSE:IAG) and Barrick Gold (TSE:ABX) were among the few gold miners on the wrong side of the movement, as all of them were down at the end of the trading session, although Agnico-Eagle did go to the positive side in electronic trading.

Gold miners had been sitting on the sidelines for a lot of the gold bull market, as they lagged behind gold futures for some time. That now seems to have changed, and we could see some nice moves now that it appears the sector has finally broken through.

Silver may be about to experience the same thing, as they were pulled upward by the sharp increase in gold prices, and when it breaks $20 an ounce, who knows what will happen if it suddenly takes off.

Most of this is in response to investor concerns over the consequences of bailing out irresponsible countries in Europe, and to a lesser degree, the inflation challenges now facing China, which measures could cut back on demand for raw materials.

Silver Getting Some Respect

Silver has been performing somewhat like gold mining stocks over the last year or so, as expectations of breaking out were always sitting there, but it wasn't able to break through.

Now that gold has surged beyond resistance points, there are no short-term barriers in its way to stop it from rising at a steady pace.

Silver, along with gold mining companies, has now broken out with gold in its latest move, and could break the $20 an ounce mark sometime soon, and from there will probably find support and start to rise much higher as a result, with some thinking in the months ahead it could break the $25 an ounce barrier.

Once gold shattered all-time records yesterday and today, gold mining companies started responding in similar ways, especially junior and mid-size companies, which had been sitting still for quite some time waiting for the right moment, and that moment is now, as investors pour money into the sector.

For silver, if it starts to act in unison with gold, and investor continue to look for a safe place to put their money, silver could start a huge bull run where it's anybody's guess where it'll end up. We're in for some interesting times ahead, and gold, silver, and gold mining stocks should do very well over the next year, and while ultimately correcting, there is nothing in the near or mid-term future which indicates it will interfere in this process, even if interest rates are raised by the Federal Reserve, which may be for the most part ignored in the light of these extraordinary economic times we live in.

Endeavour Silver (TSE:EDR) Profits Up

Endeavour Silver (TSE:EDR) reported earnings for the first quarter have increased to $1.7 million, or 3 cents a share, improving over the same quarter last year where the company lost $1.7 million or 3 cents a share.

Gold production increased for Endeavour to 3,775 ounces, a 62 percent improvemnent. Silver production was also up, reaching 766,210 ounces, a 34 percent gain.

Overall revenue for the quarter was over double what it was last year, growing to $18.2 million, a 115 percent rise.

Guidance for the company wasn't great, as they stated the company will increase spending on exploration, which will cut into earnings for the second quarter.

Even so, gold producton should increase at the company for the next quarter, and gold prices are expected to continue rising as well.

Alcoa (NYSE:AA),Caterpillar (NYSE:CAT) Push Dow Down

Alcoa (NYSE:AA) and Caterpillar (NYSE:CAT) were the chief catalysts to driving down the dow, as it fell off the cliff to the tune of 4 percent last week, the largest drop since February.

With the exception of gold, commodities took a big hit as investors migrated to safe haven, with gold leading the way, and the U.S. dollar also getting some attention.

The sovereign debt crisis in Europe continues to hammer the markets as ongoing fears of contagion which could spread far beyond the nations with sovereign debt issues, and beyond Europe itself, as uncertainty on how it will affect the still very weak global economy has investors running for protection.

Gold prices today are close to all-time highs as a result of seeking safety.

Yamana (TSE:YRI) Earnings Up on Gold Production, Price

Yamana Gold (TSE:YRI) (NYSE:AUY) enjoyed a 62 percent increase in its first-quarter revenue, as gold production rose along with the price of gold.

Earnings for the quarter increased by $79.5 million, or 11 cents a share, although it would have been even higher except for the large foreign exchange gain in the same quarter last year.

Profits came in level with what analysts estimated of 11 cents, before one-time items.

In the same quarter last year Yamana posted profits of $86 million, or 12 cents a share.

Revenue increased to $346.3 million on production gains of six percent, as well as the rise in gold prices.

Using base metals production as a cost offset, cash cost an ounce came to $161.

Guidance for 2010 was reiterated with expectations to reach production levels between 1 million to 1.1 million gold equivalent ounces.

Newmont (NYSE:NEM) Soars on Copper, Gold Prices

Newmont Mining (TSE:NEM)(NYSE:NEM) had its earnings soar as increasing prices of gold and copper generated earnings of $546 million, or $1.11 a share.

Production was another key factor in the solid quarter for Newmont, with gold production up slightly, but copper production was over double what it was a year ago, as well as copper prices, which almost doubled from $1.69 a pound last year during the same quarter to $3.33 a pound the latest quarter.

Average price for gold per ounce was $1,106 an ounce, up from $906 an ounce last year.

“Fundamentals including evidence of a rebounding market [for gold] in India and growth from the jewelry market in China, plus sustained flows and historically low central bank sales continue to support gold price performance,” Newmont CEO Richard O’Brien told analysts in the conference call.

Investors Flee to Gold for Safety

Gold prices moved higher today as investors fled to safety after the S&P downgraded Greece and Portugal, with Greece debt now being classified as junk and Portugal debt being downgraded two levels.

While ongoing opposing possibilities continue to weigh on gold, for now it seems things will continue to support gold prices, and they'll continue their upward move.

The major event waiting on the sidelines is the increase in interest rates by the federal reserve, which they've said isn't going to happen any time soon. But investor will listen closely as usual to any hint concerns over inflation could cause that to change.

Freeport-McMoRan (NYSE:FCX) Locks in Profits

Freeport-McMoRan (NYSE: FCX) has a great quarter as expected, as the mining company, through its gold, copper and molybdenum metals carved out a nice profit of $897 million, or $2.00 a share.

Last year during the same quarter they only generated $0.11 a share.

Even with gold production dropping to 478,000 ounces and copper to 960 million pounds, a little less than last year, molybdenum surged to 17 million pounds and the price increases in all of them more than made up for production decline.

As with every significant copper mining company, Freeport enjoyed the rise of copper prices, whose realized price was $3.42 a pound, almost twice what it was last year in the same quarter.

Gold rose from $960 an ounce to $1,110 an ounce this year, and molybdenum had a solid 30 percent upward movement, reaching $15.09 a pound. Add to that the additional production of molybdenum and it had a great effect on the earnings.

With copper and gold, prices are expected to continue to rise, and the demand for steel and the use of molybdenum in connection to that sure to grow, everything is running on all cylinders for Freeport.

Gold, depending on where the price has been when the next quarterly report comes out, is probably the least sure in the short term, as there are a lot of variables and factors which could go either way for the metal, and things like Greece, inflation, safety, the euro and the U.S. dollar all connected to its performance.

So many of these factors are moving on almost a daily basis, and so gold will swing during its ultimate continuing upward climb, but mining companies, in that regard, will go up and down with it. Freeport is one of those, although they won't swing as much as the junior miners who are more susceptible to the price movements.

International Tower Hill Mines (AMEX:THM) Continues Strong

International Tower Hill Mines (AMEX:THM) has been a solid performer among gold mining stocks while the gold correction was going on, and that speaks well for the company.

It's possible International Tower will reach a low that is higher than in the past, and from there find a much higher high than it has in its relatively short history.

The range over the last twelve months has been from $2.35 to $8.08, and has been moving sideways so far in 2010, and could be ready to go up in price and break through the $8.00 barrier on a consistent basis.

This is a gold mining stock worth taking a look at and watching closely. A significant dip of any kind could be a strong buying opportunity.

Allied Nevada Gold's (AMEX:ANV) Great Performance

Over the last year and a half, Allied Nevada Gold (AMEX:ANV) has been one of the stronger performing mining companies, continuing to move up on a nice stair-step pattern during that period of time.

For the last 52 weeks, they've continued to do the same, moving from a a range of $5.29 to $17.16.

Obviously tied into the performance of gold, Allied Nevada Gold will move in accordance with gold prices, and that bodes well for the company and its investors, as it will probably move to more all-time highs in the near future (share price), as gold continues to be the preferred place of safety for investors, and ongoing uncertainty in the markets along with inflation worries should keep gold prices up for some time.

It has yet to be proven how gold prices will respond to interest rate hikes, but that shouldn't be for some time, and with the decoupling from the U.S. dollar recently, it may have far less impact on gold prices than in the past, and gold miners like Allied Nevada Gold.

Freeport-McMoRan (NYSE:FCX) Beats Estimates

Freeport-McMoRan (NYSE:FCX) exceeded expectations for the quarter, as net income grew to $897 million, or $2 a share. Analysts had been looking for $1.91 a share.

In the same quarter last year Freeport generated $43 million, or 11 cents a share.

Overall revenue surged to $4.36 billion from $2.60 billion last year, a little less than the $4.49 billion analysts expected.

Most of this came about from the increase in copper prices over the quarter, which almost doubled from last year, growing from $1.72 to $3.42. Gold prices were up from $904 an ounce to $1,110 an ounce, while molybdenum increased from $11.52 a pound to $15.09 a pound, all adding to the performance of the company.

The board of Freeport also gave shareholders a nice surprise, doubling the dividend of the common stock from 60 cents a share to $1.20 a share on an annual basis.

George Soros' Gold Bubble Stupidity

Earlier in the year George Soros made the ridiculous comment that gold was in a bubble, but not only that, it was "the ultimate bubble," said Soros.

Of course he's been proven to be completely wrong, as the fading former investing star obviously was playing investors in an attempt to influence gold on his behalf, as he had invested millions in gold companies not too long before he made the statement.

It's quite possible he had shorted the position and was hoping investors would flee gold and prices would plunge. He could make a ton of money that way, or he may have been trying to get people to sell their positions in gold mining companies and then buy up a bunch of shares at depressed prices.

Either way, it didn't work, and gold continues to have support, and there's little in the near future that will change that, and in the long term it seems that will be the case as well.

Of course when interest rates are ultimately raised, we'll see at that time how far gold has decoupled from the U.S. dollar and if it's standing on its own in a way it hasn't for a long time.

There are so many variables at this time, it's impossible to see very clearly, even in the short term, and with the U.S. government, and other governments around the world, interfering and influencing markets in major ways, it's hard to tell what they may do to upset things, as it's usually something stupid with the normal unintended consequences.

Even if there is a major gold correction, I don't think we'll be seeing it fall far below $1,000 an ounce any time soon, and even if it does, the economic climate we live in and the inevitable economic challenges we're going to continue to face in the near future, gold will remain one of the few safe places people will run to, and that isn't even bringing inflation into the picture, which is happening in a number of sectors already, such as iron ore and copper prices.

Yamana (TSE:YRI), Barrick (TSE:ABX), Gold Prices Up

Yamana, Barrick and others go up with spot gold prices

Gold prices had a slight rebound today, and gold mining stocks responding by increasing as well, with gold producers like Yamana (TSE:YRI) (NYSE:AUY), Barrick Gold (TSE:ABX) (NYSE:ABX), Kinross Gold (TSE:K) (NYSE:KGC) and Jaguar Mining (NYSE:JAG) moving up on the day, depending on what stock exchange they were listed on.

Some pulled back while others continue to go up, even in after-hours trading.

After a surge which brought spot gold prices up to $1,147 an ounce, they've pulled back to around $1,140 an ounce, but still a lot higher than the gold lows experienced last week.

Freeport-McMoran (NYSE:FCX) Profits to Rise

Even with the pressure of increased input costs, Freeport-McMoran (NYSE:FCX) is expected to generate about $1.91 earnings per share for the first quarter. The earnings report is scheduled for Wednesday morning.

Freeport-McMoran is positioned about as strongly as any mining company, and when considering production costs and scale, will continue to be among the industry leaders.

Part of the reason for the optimism concerning the company is the rise in price of copper and gold, which should counter the rise in production costs.

With both metals expected to continue to rise in price over the long term, Freeport-McMoran should be among the top mining companies for revenue and profits years ahead.

Freeport-McMoran owns the largest gold mine in the world and the third largest copper mine, both represented by the Grasberg mine in Indonesia.

Aura Minerals (TSE:ORA) Gold Production Up

Aura Minerals (TSE:ORA) has been one of the stronger performers of the emerging gold mining companies, and those owning shares in the company have ridden them for a strong 160 percent gain over the last year, and they're poised for a strong year going forward as well.

One of the elements making them a strong company is the increased production, where they're ready to reach their goal of 190,00 ounces of gold for 2010.

They are achieving this through more capital investment and the pending acquisition of two mines.

At its San Andres Mine in Honduras, Aura has increased its gold production in the first quarter to 19,299 ounces, a gain of 32 percent over the year before.

The company is somewhat of a sleeper because most don't know a lot about the assets they control, including the more hidden ones: the Aranzazu Project in Mexico and Serrote Deposit in Brazil, which is located within the Arapiraca Project. Metals combined from both these mines include copper, iron, gold and silver.

If the prices of these metals hold for some time, the revenue and profits from them will make Aura a player among its larger competitors.

Freeport-McMoRan (NYSE:FCX) Earnings Report Wednesday

Freeport-McMoRan (NYSE:FCX) will report its quarterly earnings on Wednesday, April 21 before the market opens.

Analysts expect earnings per share to come in at about $1.92.

Freeport is a huge copper and gold play, and while it is pretty high priced at this time, is expected to perform strong based on valuations of copper and gold.

Even so, Freeport will pretty much fall on the prices of copper, and to a lesser extent gold, and so is vulnerable as well as strong, depending on how those two metals perform.

Demand for both seems to imply Freeport should enjoy some good years ahead, although he may take some time to push through to former $90 a share marks.