Gold prices have been more than doubling over the past few years, giving related shares and exchange traded funds(ETFs) a glimmer. Can the metal break the $5,000 per ounce threshold?Are there fundamental indicators that prove gold is going to hit $5,000 per ounce anytime soon? Peter Krauth for Money Morning says that there are five reasons gold is going to soar much higher than the current prices. [More reasons for the uptrend.]

  • Inflation: Worldwide, central banks have rolled out an unprecedented $12 trillion worth of stimulus programs, with most of the money still to be spent, making the case for inflation much more prominent than deflation. Frank Holmes, U.S. Global Investors CEO, feels that inflation expectations have risen sharply in the past three months, as well.
  • Major demand: Investment demand in gold is high. Large institutional investors, hedge funds and pension funds are making large allocations to gold, as are individual investors. The World Gold Council says that demand has grown 15% from the second to the third quarter last year. Holmes looks to China as the primary driver of growth, noting that the World Bank just predicted 9% growth this year in the country.
  • Central Banks Are Buying: BlackRock , one of the world’s largest investment managers, said that 2009 was that turning point. If that was the case, it will have been the first time in 20 years, as central banks have been net sellers of gold since 1988.Central banks are now buyers of gold, not sellers.
  • Currency crisis? Many countries are not yet in good fiscal health, the United States included. Additional sovereign-debt downgrades from ratings agencies are but one potential trigger of a currency crisis, and investors are finding their faith has been shaken. [Why precious metals ETFs have transformed investing.]
  • Mania stage, or panic: This process could start with currency devaluations, followed by increased investment demand and culminate in an ascent into the stratosphere. Be on alert for any bubbles, and know how to act when you spot one. [What to do about bubbles.]

For more stories about gold, visit our gold category.

  • SPDR Gold Shares (NYSEArca: GLD)

  • Market Vectors Gold Miners (NYSEArca: GDX)


  • iShares COMEX Gold Trust (NYSEArca: IAU)

  • PowerShares DB Gold Fund (NYSEArca: DGL)

  • ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)

Read the disclaimer, as Tom Lydon is a board member of U.S. Global Investors.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.