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Paul Walker calls gold to $1,100
Brendan Ryan
Posted: Thu, 08 Jan 2009

[miningmx.com] -- GFMS CEO Paul Walker predicts gold could rise to about $1,100/ounce by the end of 2009 with an “outside chance” of the metal reaching $1,200/oz during the year.

The UK-based precious metals analyst has turned more bullish on gold’s prospects following the financial crisis that erupted from September onwards and the steps taken by US and other government authorities to deal with it. Walker has been “on the money” with his predictions for both gold and platinum during 2008. In December 2007 he stated his belief that gold would not reach $1,200/oz by the end of 2008 and, in April last year, he turned negative on prospects for the platinum price contrary to conventional platinum industry wisdom at the time. Walker said: “Gold is looking a very attractive proposition for those people looking for a safe place to put their cash. “You have to look at the huge fiscal stimulus packages already put in place by the United States authorities and with more being promised once president-elect Obama gets into office. “These involve the creation of enormous amounts of debt by the government. There is no free lunch here. When it comes to repayment of the debts, government will have the choice of raising taxes or allowing inflation to run. “It is much easier to take the pain of rising inflation than it is to take the pain of higher taxes.”

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Inflation is traditionally good for gold but some economists, in particular “Dr Doom” - New York University economics professor Nouriel Roubini, who predicted the financial crisis a year advance - believe the economic outlook is one of severe deflation. Deflation is bad for gold but Walker does not accept the deflationary economic outlook. He said: “I just don’t see deflation being a real issue in this market. You may see inflation rates coming off from their 2008 peak levels in the short term, but the more important issue concerns the situation where you have highly negative real interest rates. “I believe the current flight to the US dollar could reverse and the dollar could weaken significantly.” Walker’s views on inflation are supported by former Gold Fields CEO Ian Cockerill, the executive with whom Walker took a bet against the gold price reaching US$1,200/oz during 2008. Cockerill is now CEO of Anglo Coal but he still clearly follows the gold market closely. He said: “The inflationary pressures that must result from all these financial bail-outs must lead to higher inflation rates, which must lead to a higher gold price. I am surprised that gold has not yet performed as a result.”