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Where Will Gold Price be Heading for 2010

February 6, 2010

Gold prices and gold sector is one of the bright spots in 2009. For the year, gold prices went up 40%, reached as high as $1,200 per ounce. Many gold stocks did much better. It is not uncommon to see many gained 400% - 500% last year.

Now the question is " Can we see the same performance this year?"

Many analysts say Yes. Some predicted that we may see $1,800 per ounce this year, 50% from last year's high and 80% from current price. Oh!!!

But we are not so optimistic. We believe that we will see flat or even meld decline for the gold price in 2010.

Here is our reasoning:

1. If you look at long term trend, yes, gold is very bullish. But the trend is always that one year up followed by next year's adjustment. This is the year which will spend most of its time to digest last year's gains. See GLD chart since 2005:

2. The force behind last year's gain in gold prices is directly linked to world wide relaxed money policies. Almost all countries were printing huge amount of money to stimulate falling economy. Gold was used as a hedging tool. Entering 2010, the trend is that government will tighten their policies. So is the gold price.

3. When gold has appeared in the headlines (Yahoo started to show gold daily prices in its financial home page from last December) of most medias, the price is topped. No easy money can be made.

Our view:

Gold price will be traded in a rage this year with high of $1,200 and low of $900.

Of course there are always some good stocks worth to own even the gold sector even as a whole it is not favorable.

   
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