Gold Price Set To Rise As The Market Gets The Inflation Jitters

In investing timing is everything…

To make the point, let’s take a look at house prices.

I first heard predictions of a housing market crash 5 or 6 years ago. Commentators were shouting that a crash was imminent. Patently, they were utterly, utterly wrong.

The market has not crashed and the consensus now as the credit bubble unwinds is that a slowing in the markets could cause house prices to fall. Some predictions say 10%, others are more hopeful.

Should these predictions become a reality, this would not be crash. A stock market decline is only considered a crash when it falls 20%. The same should be applied to the housing market. And remember: no market ever goes up forever; there are always peaks and troughs in a bull market.

Now, consider this… If you believed the predictions five years ago and sold your property, you would have missed out on one of the best chances of increasing your wealth that you will potentially ever see. Selling your property five years ago would have been financial suicide. You would now effectively be impoverished.

Five years later, that advice COULD prove good. But that does not mean it was good advice five years ago; history has shown us that the advice was bad… very bad. After all, even a stopped clock is right twice a day.

Which brings me gold…

The gold price has surged to its highest level in almost three decades as the high oil price gave the market the inflation jitters. Gold is always a safe haven in a crisis and, as the dollar slides it become even more attractive for those of us that live outside the US.

As the credit crunch started to unwind, I told readers of my Outstanding Investments that this was the best time this year to buy gold on 28 August. This was when the price was around $660 dollars an ounce compared with the level of $820 today.

Fundamentally, I believe that the credit crisis had to propel the gold price out of its latest trading range. This is exactly what happened. Indeed, analysts are now calling for a test of the $850 historic high.

Swiss broker UBS upgraded its one-month gold-price forecast to $850 on Tuesday this week, from its previous forecast of $700. However, the broker did leave its three-month forecast unchanged at $750.

UBS thinks that a sharp correction in the gold price will happen after it has tested the $850 level. So, as with all investing, getting the timing right when you’re getting out of the trade is vital. I have to try and make that call. However, I certainly don’t think that I will have to make that judgement call soon. The oil price is likely to breach the $100 level soon. This will catalyse a large inflation scare, I believe. The gold price is supported by both fundamentals and sentiment. At the moment, the only way appears to be up…

Follow the link for more investment ideas like this from Outstanding Investments.