Gold Futures Prices Hit 25-Year Highs

Strong demand for commodities, creeping inflation, and growing interest in safe-haven investments recently pushed gold futures to their highest price in more than two decades. Many traders and investors are wondering just how high the price of gold can go.

Gold futures recently traded at their highest level in more than 25 years. But for traders and investors with a longer-term horizon, it’s quite possible that we may be in the early stages of a powerful bull market in gold futures.

During the last major Gold bull market, precipitated by the Iran hostage crisis in the late 1970s, serious geopolitical tensions and the prospect of runaway global inflation played major roles in Gold's rise from $300 per ounce to $850 per ounce. It’s important to note that gold’s all-time high would be roughly $2,200 in current dollars. A number of savvy trading pros expect gold prices to top $850 per ounce this year, and in fact, some are even calling for prices ultimately to reach $2,000 to $3,000. If you think Gold is headed higher, the obvious play is to buy Gold futures or call options. Click here to learn more about trading Gold futures online!

There are plenty of theories for the surge in gold prices -- from increased buying on the part of smaller central banks, to foreign governments diversifying away from dollar-denominated assets, to hedge funds chasing a hot market, to increased demand for jewelry among consumers in growing Asian countries. All of these explanations make sense, but here are a few other considerations to take into account:

- Persistent geopolitical tensions and the return of at least a fear of inflation may push gold higher. Gold is widely considered to be both a safe haven investment during turbulent times as well as a sensible guard against inflation. It’s the only form of money accepted worldwide that’s not tied to the fate of any single country’s economy.

- Anxiety over the U.S. federal government’s burgeoning debt load also could drive gold prices upward. Over the past five years, the U.S. debt has grown sharply, and there’s at least the possibility that some foreign investors could begin to question the country’s ability to repay the amount due and owing. If this were to happen, or if the unthinkable were to happen -- if America were to actually default on its debt -- a stampede to gold potentially could develop.

- Typically, gold is considered relatively expensive when 5 or fewer ounces of gold are needed to match the level of the Dow Jones Industrial Index. Today, even after the market run-up that’s already occurred, the price of gold appears to be relatively low, with roughly 20 or so ounces of the yellow metal needed to match the DJIA. This suggests that there may be plenty of room for gold to rise, regardless of how the stock market performs.