Price of Gold Could Rise to $5000, says President of the EPC

Gold is the preferred choice of investment by people to secure their wealth when global and domestic crises threaten to hit finances. Gold prices are recovering despite the ongoing problems in the Mideast, Europe’s credit crisis and the American budget issues. Gold futures are currently trading below $1,700 an ounce, after reaching their peak at a little above $1,900 in June 2011.

Goldman Sachs has warned of the increasing downside risks to gold, while decreasing its 12-month price prediction by 7.2% to $1,800 an ounce. Goldman Sachs was quoted saying that the price of gold is close to an inflection point.

President of the Euro Pacific Capital, Peter Schiff, disagrees with this, saying that the elements causing a decrease in gold prices are temporary and that gold will finally rally to $3,000, if not to $5,000 or even more per ounce in the coming days.

According to Schiff, the price of gold is decreasing as US investors are taking profits before a potential rise in the capital gains tax. On the other hand, investors in Europe are reducing their holdings of gold due to the increasing confidence in their economy. Schiff also says that for 2013, redemptions by hedge funds along with other institutional investors are also adding to the selloff, as these organizations try to position themselves for the New Year.

Schiff was quoted by The Daily Ticker emphasizing that gold prices have barely gone down and that the upward trend is healthy and likely to continue, especially if the US can avoid the “fiscal cliff”.

Avoiding the “fiscal cliff” will also protect against huge tax hikes and spending cuts that could threaten the economy with a recession, in turn bringing about a reduction in the demand for gold and other commodities. However, some analysts believe that a stronger economy could also lead to a lower demand for gold, with the demand for the US dollar rising.
Schiff concluded by saying, “We’re asking the world to give us money indefinitely so that we can live beyond our means, When the world figures this out and decides it doesn’t want to play this anymore, it’s going to mean a much bigger drop in the dollar. The fed will have to print even more money to keep interest rates artificially low and [gold] prices will skyrocket.”