$1,500 Gold by Year-End?

Bretton Woods Research, in a note to clients, projected that the gold price could end the year at $1,500 per ounce:

“There is a risk that gold could drift higher now, similar to how it rose following the March 18, 2009 initiation of QE1. If gold were to continue its upward trend since July 27 when it traded at $1163, it could end the year at $1500 with the S&P rallying to 1340 from 1220 today (given their strong correlation). This weak dollar trend is probably at the root of the concerns among many financial wizards that the dollar is headed for another 10+% depreciation during the next two months, or more during the next 6 months.”

“It is difficult to imagine that gold will rally so severely during the next few months, but the risk is certainly high. The Fed has not yet provided the market with a “book-end” that would indicate an unequivocal end to its asset purchases. For example, would the Fed continue its asset purchases if a storm in financial markets occurs similar to May and June 2010? Note, the negative fiscal news from Europe that prompted the global financial market sell-off back then and which caused credit spreads to widen and economic growth to slow again prompted Fed officials, in our opinion, to consider its current quant easing strategy. Furthermore, will foreign countries begin to retaliate against the Fed policy with their own brand of protectionist monetary or fiscal measures? One can clearly see that the Fed’s inflation policy could easily beget new economic problems that would devalue the fiat dollar further.”

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