HOW MUCH WILL GOLD COST BY THE END OF 2010

On October 14 another milestone in the history of precious metal trading took place.1 troy ounce of the most traded precious metal in the world (which is gold) reached a point of $1381.5. A week before this event (on October 8) gold was sold at a price of $1,365, which was a record at that time. The difference is almost 2%. The previous week's price increase amounted to 3.2% and since the beginning of the year the price of gold has risen almost 25%. What will happen next?

The analysts have different forecasts regarding this matter. Bloomberg expects (or at least expected) that the price will be fixed at $1,207 per troy ounce. And Soros Fund Management is convinced that the price will reach $1,600. And that's what Philip Manduca said in one of the interviews: "Capital Gold Group Report: Gold Heading Above $ 2,000 by End of 2010" (22 Apr 2009, CNBC TV Interview).

The current strong demand for gold was caused by fear of a wide range of investors due to the growing threat of inflation in the global economy. And threat of inflation, in its turn, was caused by projected long-standing and large fall in the exchange rate of U.S. dollar. In addition, gold is used by investors because of the negative signals regarding the prospects for EUR and the actions of the Japanese government regarding Jen.

In spite of these events, which gradually raise the price of gold, you should think twice before investing in gold. This bubble can burst at any moment just like any other bubble. For example, Soros Fund Management has sold out 341,250 shares of the SPDR Gold Trust, the largest ETP backed by bullion, in the second quarter (according to SEC (Securities and Exchange Commission) filing dated at August 16, 2010).