This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Four Reasons to Be Bullish on Gold

Written by Kevin Grewal, Editorial Director at

NEW YORK ( TheStreet) -- After a sharp selloff last week, gold prices are in recovery mode remaining above $1,100 per ounce and are likely to continue to appreciate in the future.

Inflation remains a concern amongst investors. One reason behind this is the huge pile of debt that the United States is accumulating. It is estimated that during the current fiscal year, the U.S. budget deficit will be north of $1.5 trillion and with the current spending measures, the nation's debt is expected to reach $18.5 trillion over the next 10 years. In order to help eat away at this massive deficit, inflationary measures are likely to be imposed in the near future. Gold is the ultimate hedge against a weakening U.S. dollar and inflation.

A second reason gold carries appeal is economic uncertainty. The U.S. labor force continues to remain stubborn, resulting in elevated unemployment rates. In fact, it is expected that the unemployment rate in 2010 will exceed that of 2009. On the global front, some governments are likely to implement quantitative easing to stimulate their economies, resulting in a rise in the value of gold.

A third force likely to support gold prices is the recent surge in investor demand. According to AngloGold Ashanti (AU), one of the world's largest producer of the shiny metal, investment demand for gold exceeded that of jewelry demand, a phenomenon not seen since 1980, when interest rates were astonishingly high. Retail investment demand for gold in North America and Western Europe rose 77% and the overall demand for gold has reached nearly 820 metric tons.

With this surge in demand, comes the fourth reason gold will likely appreciate: Supply and demand imbalances. Over the past decade, global mining production for gold has actually been declining, causing supply constraints. Granted, mining companies are expected to increase production levels, but this takes time to really have an effect.

In a nutshell, fears of inflation, economic uncertainty, growing investment demand and supply constraints are all reasons to be bullish on gold. Some good plays on the precious metal include:
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DGL $34.87 0.00%
GDX $13.76 0.00%
GLD $101.92 0.00%
AAPL $118.30 0.00%
FB $104.24 0.00%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs