Gold US $ 2000 and Beyond ?

First, the facts. If you were to take a pen and put a small dot on where the gold price has been at the end of every year starting 2000, every dot of yours would have come higher than the one before it. In other words, gold seems to be all set for a ninth consecutive annual gain as investors across the world seek insurance from potential debasement of paper currencies and higher inflation. Under such a scenario, it is quite normal for one to feel that the gold story may have run its course and we could be in uncharted territories where a sharp decline in gold prices could be just around the corner.

Nothing could be further from the truth. Infact, US$ 2,000 gold seems to be passé. The new target is significantly higher than that. Around 30% higher to be precise. What makes us say that? Bloomberg quotes a statement from an influential Chinese official who has suggested that Chinese central bank increase its gold reserves to 6,000 metric tonnes within 3-5 years and possibly to 10,000 tonnes in 8 to 10 years. Considering the kind of furor gold buying to the tune of 200 tonnes by India created, even if China achieves a small portion of its own gold buying objective, the resultant impact on gold prices can only be imagined. Exactly when the price target would be achieved is not known to us. But it certainly looks like US$ 2,000 an ounce gold is old fashioned and we will shortly have a new high to look up to.