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Where is the Price of Gold Heading?
 Andrew Berdelle
Gold prices have fluctuated recently, but in general they have been in a sustained uptrend over the past 10 years. Over this same 10 years, the collective monetary base has expanded significantly. As per James Bianco of The Big Picture, the combined balance sheets of the eight central banks (US, UK, ECB, Japan, Germany, France, China, and Switzerland) have grown from 5.4 trillion USD in 2006 to over 15 trillion as of November 2011.
Gold is seen as a somewhat finite source, so as fiat monies are created and the monetary base grows ever more rapidly, gold prices will maintain a strong bid. This bid in gold will be maintained because it is like pushing on a string for monetary stimulus to continue to work; ever-larger amounts are required to create a similar effect. This is where the debilitating, self-feeding cycle is doomed. So long as monetary stimulus is necessary, after a certain point it will always be necessary.
The stimulus amounts will have grown to such outrageous number that it becomes almost inconceivable for the private sector to step in and take the place of the government transfers. So long as we are in the vicious cycle of an attempt to prop up current asset prices that the collective governments around the world are all participating in, gold will be seen as a flight to safety, a store of value, and a hedge against runaway inflation as faith in fiat money wanes. So back to the original question of where gold prices are going. The long-term direction appears to be to the upside, and possibly much higher. The only caution I would suggest is that if there is a scare like we had in 2008 due to Europe or any other serious global shock, gold will inevitably get liquidated depressing the value because during margin calls things that can be sold are what is sold.
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