Overnight gold hit a new high of $1053 an ounce.  This news is not shocking if you have been paying attention to the headlines recently, especially the call for the dollar to be stricken from its position as world reserve currency.  High priced gold is great for those who have already boarded the train so to speak, at lower prices.  If you take into account inflation, gold has been one of the best investments out there over the past decade.  It’s more than tripled in value, and if it hits $1200 or higher, it will have more than quadrupled.  Gold is certainly a great investment historically, but how will history favor the yellow metal in light of recent economic and political events?

Many gold bugs argue that gold is set to explode higher, perhaps even into $2000 territory.  Still others are convinced that gold is at an all time high and that decreased economic demand and consumer spending will leave gold somewhere in the sub $1000 range by early next year.  Gold is not a wide-scale industrial metal like silver, so both of these opinions could play out in the next year.  A more likely scenario would be gold rising to the $1500 area by late next year and continuing upward through $2000 in the next 5 years or so.  The reason for this upward movement is the very fact that the US Dollar, as of late, is looking like it will take some major punishment over the next decade.  Without its position as world reserve currency, gold could really explode.

Another reason why gold has really climbed the charts recently is because of all the economic uncertainty still existing world wide.  Countries like China and India have continued their gold buying behaviors and in fact have been ratcheting up their buying to a fevered pitch this year.  China has added many hundreds of tons to its reserves in a move that is perhaps anticipating the demise of the US Dollar.  Investors concerned with inflation and economic unrest that are looking to cling to gold, as they have for thousands of years will find that they will get less and less gold for their money in a world where more and more people are in gold-heavy investment positions.

Considering this possible decoupling of the US Dollar from its position as world reserve currency, it will be interesting to see how gold coins and bullion, denominated in US Dollars will fare on the market.  With an American Gold Eagle coin still hold its value premium over so many other gold coins in other denominations or will it become a “junk” gold coin, and retain very little of its premium value?  Those who have been stacking ASE’s, as they are called in the business, may soon find that up to %10 of their bullion’s value has disappeared essentially overnight.  Other countries around the globe may be less excited about the US Dollar as a real pillar of economic stability, since it now seems this pillar is tipping and ready to collapse.