We've been enthusing about gold one rally at a time for more than a year, but it may be time to loosen up and imagine bigger possibilities. Our minimum upside objective has been 736.80 ever since the December Comex contract was trading in the low 690s. However, someone in the Rick's Picks chat room asked an obvious question the other day: 'What then?' We responded initially with a somewhat timid target of 768.90, but we're starting to think that this target, too, deserves a 'What then?' We don't need to tell anyone that bullion's price action has been more than a little encouraging lately, and that there are good reasons for this. For the first time in decades, gold is moving strongly higher not because some world-shattering geopolitical event such as the 9/11 attack, or the U.S. invasion of Iraq, has spooked it, but because of a more generalized fear that the financial markets are in deeper trouble than anyone knows how to fix. Nor can they be fixed as far as we're concerned, and so the forces pushing gold higher at the moment should not be expected to abate any time soon. (Click on pictures to enlarge) That said, we remain skeptical of predictions that gold's price eventually will surge into the stratosphere (meaning upwards of $2000 an ounce). Although that's not inconceivable, the odds it will happen must be weighed against the prospect of a worldwide credit deflation that completely wipes out personal savings. And that is exactly what will occur when the $500 trillion (per BIS) derivatives bubble collapses, as it someday must. The implosion would draw its very power from the deleveraging, or marking to market, of the entire, very thinly collateralized $500 trillion edifice of credit money. Squatters in Aspen In the wake of such a
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