Nothing to Hold Gold Prices Back Now

Based upon the assertion by Ben Bernanke that the Federal Reserve is tying its QE3 program into the performance of the job market stimulus could be ongoing for the next five to six years.

with that in mind, along with the decision to keep interest rates artificially low, gold prices should continue to push up for years into the future.

The expectations are that the Fed will continue to ease until unemployment reaches about 5.5 percent. That would result in the Fed balance sheet doubling again, assuming that figure can be met over the next five years or so. If not, the sky is the limit as to how high the balance sheet would go, which will continue to devastate the U.S. dollar, and push up the price of many commodities, including gold.

As measured by the prior experience of the price of gold moving up in conjunction with the size of the monetary base in the U.S., gold prices could soar to the $3,500 to $4,000 range before it's all through. Again, that assumes the job market improves and the Federal Reserve stops printing or digitizing money out of thin air.

Silver Could Hit $100 Says Citigroup (C) Analyst

Citigroup (NYSE: C) analyst Tom Fitzpatrick said in an interview with King World News that the price of silver could jump to around $100 an ounce if gold prices continue to soar and people turn to silver as an alternative to higher-priced gold.

Fitzpatrick said this:

When we get a weekly close through both of those critical levels ($1,791 for gold and $37.48 for silver), we anticipate that will give us an acceleration which will take us up toward the targets on gold to the $2,055 area, and silver back to the old highs near $50. However, on a longer-term basis we believe we have a setup here which suggests that gold could continue to go higher for some time to come.

We’ve always been of the view, and are still of the view that gold is first and foremost a hard currency more so than it is a commodity. So the building blocks are there for gold to continue to go higher, not just against the dollar but against all of the other paper currencies as well.

Given the dynamics that we have in the background, the similarities that we to the 70s, we would argue the combination of the similarities, and the major difference which is the money printing being exercised by all of the developed world’s central banks, we can see gold continue to follow a trend equal in magnitude to what we saw in the 70s.

Fitzpatrick sees a direct correlation between the price move of gold and the response of silver investors to that.

If we see gold move to the $3,400 level, it is not inconceivable that we may see silver closer to $100. Investors have to remember that at the end of the 70s the gold price doubled in a mere five or six weeks. If 3 to 5 years down the line we see that the base policy of the developed world is to continue printing money, then the gloves are off in terms of what levels gold and silver could actually go to.

It's highly probably that central banks around the world will continue to print money for years because they continue to hold to the flawed Keynesian view.

That's also sure to happen because corrupt politicians refuse to take the needed austerity measures to rein in out of control spending. They will continue to kick the can down the road until the global economy blows up in their faces.

With that as a backdrop, every investor should have a portion of their assets in gold and silver at minimum, and keep an eye on other commodities which will benefit from the endless printing of money.

Outside of silver and gold, investors should look at commodities that are trading at lower levels in comparison to their peers.

Barrick Gold (NYSE:ABX) Upgraded by Deutsche Bank (NYSE:DB)

Deutsche Bank (NYSE:DB) upgraded Barrick Gold (NYSE:ABX) today from "Hold" to "Buy," saying their view on gold has changed drastically based on increasing uncertainty in relationship to currencies and macro-economic conditions.

They've increased their projections for gold futures in 2011 and 2012, adding 16 percent to their former numbers, with expectations of $1,450 an ounce in 2011, and in 2012, prices are now estimated to reach as high as $1,600, which is 60 percent over their former numbers.

This is much higher than consensus in the short-term, 25 percent above those numbers.

Analyst Jorge Beristain said, “The probability of extremes in future inflationary prospects is taking a step higher over the next 6-12 months, as investors contemplate the twin threats of deflation and inflation.”