The NY spot market opened significantly lower but still hovering near the US$500 mark and continues to trade in the mid to upper US$490s.

Investment banks and brokerages are continuing to expand their gold mine holdings as Citigroup is rumored to have bought a large stake in Papua New Guinea mining company. As these stakes are sold to the major investment houses, we might see an increased demand for actual bullion — causing a rise in the price of gold.

Many gold investment experts are forecasting a major bull run over the next few years, with some believing we’ll see gold in the US$700 to US$1000 range within 5 years. I believe they’re forecasting correctly but looking too far in the future. Remember, early next year the U.S. Fed will no longer tell the world how much money it is printing. This printing causes inflation, which tends to cause consumer goods, oil and gold to all move upward compared to the dollar. With the Fed hiding the actual money supply inflationary figures, more of the world will want to hedge against dollar inflation by purchasing hard currency such as gold, platinum and silver.

This should mean an increased demand on gold as the knowledge of inflation is completely hidden. The increased demand will be reported as a price increase, and the fear of hyperinflation could possibly cause a quick rise in gold.

My buying target continues to be US$2000 per ounce, based on the Fed’s massive currency printing in the past 5 years as well as the housing and continued stock bubbles. Would I purchase gold at US$2000 per ounce? Not for investment, but as currency. Even if gold hits US$1000 per ounce and then dives back to US$500, the loss, to me, is less frightening than a stock drop or a housing crash. Gold is security.

We will continue to see profit taking in gold and I do believe gold will settle into the high US$470s before year’s end, but I continue to look at gold as a steal at current prices. Daily, weekly and even yearly fluctuations in gold matter little once you feel the weight of the material in your hand. 1 ounce of gold feels more valuable than 10 US$100 bills.

Gold closed today on the NY gold market at US$499.90, but after hours open market pricing is fluctuating between US$499 and US$501.

Most international media outlets are reporting gold’s increase as a hedge against inflation, and some are noting higher demand for jewelry in India and other countries during the end-year months. U.S. media reports are not mentioning inflation as often as the international media outlets are, which is odd as the central bank continues to inflate the currency as seen in the M3 money output chart.

Gold discoveries continue to be reported around the world, which could lead to a greater supply of gold and help to keep the price from skyrocketing.

Gold bugs that hold gold as money and not as an investment prefer to see a steady increase in gold rather than leaps that might signify an investor-created bubble. As more central banks and investors start picking up gold for short term gain, we may see gains that are faster than the market would normally provide. Personally I feel gold is very undervalued, but if the majority of investors and banks pick up gold for short term gain, we’ll see ups and downs in short graph views, but a general upward swing as gold catches up to the inflation of the dollar and other currencies.

With oil prices dropping over the past few weeks, it is a surprise to see gold continue to move up. The US dollar also has been increasing against other currencies, yet all the currencies are being inflated by the central banks, so the continued rise in gold’s price is no surprise to me.