Destination For Gold is $7000

"It all depends on Fed policy," said James Rickards, managing director at Tangent Capital, who expects deflation fears to outweigh the Fed's desire to taper. Right now, he said, the fact that real rates are above inflation is a bearish signal for gold, and expectations of continued policy tightening is also pushing down prices.

"The case for buying gold is that the Fed is going to back off," he said. "They're not going to taper later this year. They'll actually going to increase asset purchases because deflation is winning the tug of war between deflation and inflation. Deflation is the Fed's worst nightmare."

"In the next two months, the Fed is going to make it clear that they will not taper," he predicts. "That's very bullish for gold."

Aside from Fed policy, Rickards expects China to start buying gold at these low levels, up to perhaps 4,000 tons. "People will say 'Why is China buying gold if it's so worthless?' " he said.

Rickards said that the destination for gold is $7,000 per ounce, although tightening of Fed policy could drive it down to $1,000 on the way there.

- Source, CNBC:

http://www.cnbc.com