Gold Bullion–Not a Rocket Ship Just Yet

Yesterday, gold prices surged $14 U.S. per ounce to a new post correction high of $647 U.S. an ounce. While many gold bugs were out celebrating the return of the gold bull market, I caution my readers.

In the short years ahead I see gold prices trading much higher than their current level. I’ve expressed this to you in many of my financial columns over the past three years. But at this point in time, I wouldn’t call the correction in gold prices complete. In fact, I wouldn’t be surprised to see gold bullion simply trading slowly up or down in the couple of months ahead.

Why the caution?

It seems to me that every major investment player is short the U.S. dollar. Gold will rise in price as the U.S. dollar collapses because it will be the only alternative for investors to flock to. But right now, with so many investors bearish towards the U.S. greenback, I’m not so sure the U.S. dollar is ready to collapse.

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In my investment experience, when everyone in the market expects something to happen, it usually doesn’t. We’re going to need to see some more damage to the American economy occur before the U.S. dollar comes in for a landing. Lower American property prices, more debt, and lower U.S. retail sales remain ahead: As this story develops the U.S. greenback will start to fall.

In summary, I’m bullish as ever on gold bullion and quality gold stocks–I simply think gold will be a huge winner in the years ahead as the value of the U.S. dollar is thrown into question by big foreign investors. But I don’t think gold will simply takeoff from here after its brief price correction. (We’d be kidding ourselves if we thought that.) Some more time will be needed for gold bullion prices to consolidate and to form a solid base from which to make its next major move up.