An interesting snippet carried by MarketWatch this morning is that Merrill Lynch, yes they are still with us, predict higher gold prices due to the inflationary effects of the current financial bail out.

From an article by Moming Zhou who wrote the following:

NEW YORK (MarketWatch) — Gold prices could hit $1,500 as global plans to rescue the financial industry are set to increase inflation pressures, according to analysts led by Francisco Blanch at Merrill Lynch. “The unintended consequence of the ongoing financial bailout will be a return of inflationary pressures to the commodity markets,” wrote the analysts in a note released Monday. The analysts didn’t say when gold would hit the price target. They also predicted oil prices will rise to $150 a barrel.

We agree with the above but it is a pity that there is no frame to go with it, as an open ended forecast will probably be fulfilled at some time down the line, but when? Timing as you all know is about 90% of a good investment decision. For Options traders it is everything. Well, for its worth we will put our best estimate to this prediction. By the end of the year we still expect to see gold trading above $1000/oz and by April 2009 it could very close to the $1500/oz mark. Our necks are on the block along with our money.

Speaking of money we still have some ‘opportunity cash’ on the sidelines, which we will deploy as soon as we have done the work to identify the vehicle that offers us the best value in order to take advantage of this end of year rally.

Have a good one!

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