Gold has surged to a new record high above $1,040. This Fool thinks $2,000 is possible before the bull run is over.
You may wish to mark the date on your calendar. When you look back on the deterioration of the US dollar and its role as a global reserve currency, this will stand out as a pivotal moment.
Gold exploded through an 18-month trading range on Tuesday, officially terminating an epic test of wills for seasoned precious-metal investors. They stood by their analysis of the fundamental landscape for the dollar, even as pundits clamoured to declare an end to this nine-year bull market for gold and silver. Surpassing $1,040 per ounce, gold replaced the previous highest price of $1,033 set back in March 2008.
Shares of the popular US SPDR Gold Shares exchange-traded fund reached a fresh 52-week high. Agnico-Eagle Mines, meanwhile, remains $13 below its March 2008 highs above $83 per share, and I recently pointed out the sizeable disconnect between the price of Yamana Gold shares and their respective historical prices.
Grab The Bull By The Horns
I understand that many investors have approached gold and silver with extreme caution. As I have done since 2006, I encourage Fools to grab this gold and silver bull by the horns. But do so methodically, selectively, and with the expectation of increasing volatility as the bull market progresses.
At this watershed moment in the precious metals bull market, I recommend that Fools continue to focus on the fundamental macroeconomic drivers. I documented a series of meaningful developments in Asia that helped to propel the early stages of this surge last month, and now it's the turn of the Middle East.
The Independent reports secret meetings between key Gulf Arab states and China, Russia, Japan, and France about ceasing the trade of oil in US dollars in favour of a multicurrency basket. If true, that would be a major development in the deterioration of the greenback's strength and viability as a means of trade.
However, a top official from the Organization of Petroleum Exporting Countries denied this revelation, calling it "just speculation" and saying that OPEC is "not in any sort of discussion over pricing of oil." True or not, this still remains the mother of all currency crises.
$2,000 Gold
Readers may know that I anticipate a gold price of at least $2,000 before this bull stops bucking, and the dollar's unfortunate outlook continues to support this position.
Companies to keep an eye on include Hochschild Mining (LSE: HOC), Randgold Resources (LSE: RRS) and Russian gold miner Petropavlovsk (LSE: POG). Within the silver realm, where I maintain the slingshot effect will yield still-greater price appreciation, in the US, Silver Wheaton and Coeur d'Alene Mines are noteworthy contenders, whilst here in the UK, Fresnillo (LSE: FRES) is the largest of the quoted pure silver miners.
Whichever vehicle you ultimately choose, know that this bull will not be a smooth ride, and try not to get bucked off by corrections along the way.
More on the economy and the markets:
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> A version of this article was originally published on Fool.com. It has been updated by Bruce Jackson, who doesn't have an interest in any of the companies mentioned in this article.
