Gluskin Sheff analyst David Rosenberg says the breakdown of the euro could well drive the price of gold to $3,000.
"The case for gold heading to $3,000 an ounce is getting stronger by the day," Rosenberg writes in a note to investors.
"The euro has already broken below 1.30 to the U.S. dollar and there is plenty of room for additional decline going forward."
"It's only at a one-year low — wait until it moves to a decade low."
The European Central Bank, Rosenberg notes, has been forced to water down its charter as it permits sub-investment grade Greek bonds as collateral.
“Sadly, the central bank is not a remake of the Bundesbank and the Euro is less of a “hard currency” than its architects could have ever envisaged a decade ago,” Rosenberg says. “Now there is talk that the ECB is contemplating a quantitative easing plan.”
“Contagion risks” from the Greek financial crisis loom, “and there are simply not enough trees on the planet that can provide enough paper currency to backstop countries like Portugal and Spain,” Rosenberg says.
“And let’s not forget about Italy — its public finances are less dire but still fragile”— all of which make this a great time to buy gold.
Gold was rising Thursday as investors bought gold as a safety net against the sinking euro, Greece riots and spreading Portugal debt fears.
Gold delivery for June was rising $10.30 to $1,185.30 an ounce at the Comex division of the New York Mercantile Exchange. Gold prices Thursday have traded as high as $1,187.30 and as low as $1,173. The euro kept making new one-year lows, falling to $1.27 against the dollar.
Gold is an appealing investment during times of financial crisis and currency debasement as a form of money that doesn't lose value. But investors' need for cash beat out bargain-hunters and gold prices fell.
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