RE: Has Gold Peaked or is it Going Higher

I am short-term bearish but long-term bullish on the yellow metal. 

Fundamentally, as demand for gold has shifted from physical (jewelry and doomsday hedge) to paper (namely ETFs), the short term price of gold will likely top out at around current levels.  The statistics regarding this shift and its effects are astounding: GLD (the gold ETF) has the 7th largest holding of the physical metal in the world (and is second in total value amongst ETFs, trailing only the SPY); worldwide jewelry demand for gold still accounts for ~75% of overall demand and India, the world's biggest importer of gold, imported 81% less gold in December.  Although the existence of gold ETFs has broadened the metal's appeal to the general public, it can act as a detriment as well – something that we witnessed last year with oil.  Furthermore, as the stock market probes its bear market lows and the economy continues to deteriorate, the likelihood of drastic (not necessarily effective – but that's a different discussion) government action increases, producing a scenario where the markets rally and funds flow out of safe haven investments such as gold.  Lastly, there is the psychological/technical barrier associated with the mythical “$1,000” price level.  Despite all of the talk about how gold’s all-time high would be >$2,000 if we adjust the previous 1980 high for inflation, $1,000 is the level we’re at, and is still the nominal all-time high for the metal; the fact that it is a nice round number contributes to its status as a level of price resistance. 

However, any correction to gold prices should be shallow and swift, as demand for jewelry and institutional demand for the ETF (institutions tend to be long-term holders when compared to retail investors and thus have a tendency to average down on their positions) will provide a solid floor.  Long term, the gold story is simple: we’re still faced with an inflation demon that will likely grow in size with each round of governmental assistance and won’t be going away at anytime in the foreseeable future.  And even when the world economy recovers and we can begin referring to this period as “The Great Recession”, memory of the hardships brought about during these times will keep gold as an integral part of most investment portfolios for many years to come.

RE: Has Gold Peaked or is it Going Higher

I believe gold will set a new high within the next 18 months as inflation sets in within that same

time frame and the geopolitical situation continues to deterioate.