How to Play $10,000 Gold

By Commodity HQ  SEP 19, 2012 12:20 PM

If you're looking to make a play on the precious metal, check out these potential strategies.

 


“The world’s economy is a soft-paste porcelain vase set on a wobbly plant stand in the heart of an active earthquake zone.”

Not only is that one of the best analogies I have ever read, but Jim McTague’s wording also hits the nail on the head for just how fragile our economic situation really is. Europe is stranded by mounds of debt from nations who can never seem to fully agree on what to do next, conflicts in the Middle East are only getting worse, and US debt levels have recently surpassed that of our GDP, fantastic. But there is one positive takeaway for investors and that came from Ben Bernanke’s decision to implement yet another round of QE.

That takeaway comes in the form of one of the worlds most coveted commodities, gold. As the Fed continues to print money, gold will likely continue its climb as it makes its way towards historical highs. Some economists, like Peter Schiff, have predicted the precious metal will hit $5,000/oz. in the near future, while others have been as bold to say that gold is going straight to $10,000. While a timeline on these predictions is relatively muddy, are gold prices of this magnitude really possible?

From a macroeconomic perspective it certainly seems likely that gold has nowhere to go but up. While many are resting the fate of the country in whichever candidate comes out on top in November, the truth is that the damage has already been done. Our debt levels aren’t something that can be fixed in four years, and probably can’t even be fixed in eight. With the Fed continuing to dilute the money supply and a fiscal cliff on the horizon the US seems like it is ready for a few rough years. Some argue that we will try to inflate our way out of debt, and if that is the case, gold will still see a handsome rise due to its ability to hedge against inflation.

But the US is not the only thing playing into gold’s rise; a worry about emerging market slowdowns along with economic crises all around the world have painted the picture for some dark days ahead. While we are not saying that gold will hit $10,000 in 2013, we certainly are not ruling out the possibility. For those looking to make a play on the precious metal, we outline several options below.
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Editor's note: This article by Jared Cummans was originally published on Commodity HQ.
No positions in stocks mentioned.