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2009 Gold Outlook

Written By Luke Burgess

Posted January 5, 2009

The investment markets are yielding to the fact that the global economy will remain weak for the better part of 2009.

As a result, investors will continue to seek safe havens.

Under normal conditions, these safe haven investments would include land and real estate. These assets have intrinsic value; or in other words, their value will never fall to zero. But with falling prices, investing in real estate is out of the question for most people right now. And there’s little doubt that investors will look elsewhere for safety against financial crisis.

The best safe haven asset in the world right now is still gold because it is never considered to be a liability.

And we believe that safe haven investment demand will drive gold prices during 2009. With this in mind, we would like to present a broad overview of Gold World‘s 2009 gold outlook. But before we get into that, let’s review what happened to gold prices in 2008.

Gold Was One of the Best Investments of 2008

In March 2008, gold prices hit a record high of $1,033 an ounce as the gold bull market entered its seventh year of life. This was followed by a normal 18% correction, which drove gold prices back down to $850 an ounce.

Gold prices subsequently rebounded and were once again closing in on the $1,000 level in mid-July. At the same time, however, the fundamental and psychological effects of the slowing housing and credit markets were just beginning to devalue significantly the investment markets across the board.

As a result, many long gold positions had to be sold in order to cover losses from investments in other markets. Over the next several months, this forced selling pressure pushed gold prices down.

Gold prices were also held down during the second half of 2008 as the U.S. dollar enjoyed a +20% rally. Foreign governments, institutions, and banks began buying the U.S. dollar, which despite a legion of problems continues to be the world’s most important reserve currency, as a hedge against domestic economic turmoil.


These factors contributed to a significant drop in the price of gold, which officially bottomed out for the year at an intraday low of $683 an ounce in October 2008.

Gold prices have subsequently bounced off of the $700 level as major selling has dried up, and fresh buying has come into the market.

Despite three 20% corrections and serious deflation in the market, gold exited 2008 with a positive 5.4% gain for the year. Although subtle, this gain outperformed every major equity index and commodity in the world. Here are just a few examples…

Percent Change During 2008
Dow Jones
S&P 500
TSX -35%
TSX Venture -74%

This made gold one of the best investments of 2008.

And the 2009 gold outlook looks just as strong.

Gold’s 2009 Outlook

Despite a bit of downside in the immediate future, we expect gold to have a stellar year.

Global economic turmoil and deflation will undoubtedly continue to influence gold prices in the near-term. A short-term pullback in gold prices from current levels to $800—maybe even a bit lower—before a recovery is not out of the question. However, we expect gold prices to break new records during 2009.

For our current perspective, we expect gold prices to reach as high as $1,300 during 2009, which would be a profit of over 50% from current levels.

Gold prices in 2009 will be supported more heavily by supply/demand fundamentals than in the previous years of this gold bull market.

As we’ve previously discussed, during the third quarter of 2008, world gold demand outstripped supply by 10.5 million ounces. This deficit was worth $8.5 billion and was the largest supply/demand deficit since the gold bull market of the 1970s.

Official 4Q 2008 world gold supply/demand figures will be calculated and reported later this month. Gold World will report them to you when the data is released.

In the meantime, though, all estimates suggest that there will be another very large deficit in world gold supplies from the fourth-quarter, with investment demand continuing to drive the market.

We expect that a continuing surge in investment demand could push gold prices as high as $1,300 at one point during 2009.

There will likely be a bit more volatility in the gold market in 2009 as more and more speculators come into the market. It is likely that the gold market will experience three or four price peaks (selling points) during 2009.

How to Invest in Gold for 2009

As we expect a near-term drop in gold prices as a result of continuing deflation, we are advising our readers to hold off on any physical gold buying for the immediate future. As previously mentioned, gold prices could dip back down to $800 before recovering again.

Nevertheless, we expect 2009 to be another great year for gold investors.

Good Investing,

Luke Burgess and the Gold World Research Team

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