Shocking Gold Prediction for the Summer; 3 Hot Gold Stocks

James Turk, gold guru and founder of bullion storage service Goldmoney, predicts a rapid rise in the gold price during the precious metals historically seasonally weak summer months.

Commenting on King World News today, Turk said the gold market won’t follow the past 29-year history of seasonal weakness during the summer months of June through August.  Instead, he expects a rerun of the breathtaking move in gold that took place during the summer of 1982, during which time the gold price soared 50% amid speculation that the Mexican government would be denied credit amid fiscal and economic conditions in that country.

In 1982, Mexico had devalued the peso three times and nationalized the banking system in an effort to right imbalances in the country’s national debt levels and trade.

“I think this summer is going to surprise a lot of people,” said Turk. “Many are thinking this is going to be another typical summer where precious metals prices are weak, but it doesn’t always happen that way Eric.  Sentiment is set up this way because it has been 29 years since we have seen a big rally in the summer. Back in 1982, the Mexican debt default lit a fire under the precious metals and the gold price nearly doubled over the next six months.”

Turk sees similarities to Mexico in Europe.

Today, Greece’s fiscal problems rival Mexico’s of 1982, said Turk, and further complicated by the added instability in the currency markets that may develop from the Federal Reserve’s stated intention to end new debt purchases in the U.S. Treasury market in June.

“This year it is not Mexico in the headlines, but rather Greece that is ready to default,” Turk explained.  “Of course the other big news item coming up this summer is the Federal Reserve’s announced intention to end QE2.  It’s amazing that so many market participants are taking the Federal Reserve at their word.”

As a regular guest of King World News, Turk had previously made similar statements regarding his expectations of lofty targets for gold during the seasonally weak period for the yellow metal.

On May 3, as gold and silver were in the midst of a sell off phase, Turk said, “You know my longstanding price projections have been $1800 gold and $50 silver by the end of June.  Silver essentially reached my target already, so it would not be surprising for it to move sideways in a large trading range waiting for gold to catch up. But regardless of when those price targets are reached, KWN readers need to focus on the fact that the U.S. dollar remains in a long-term bear market.”

Turk appears to be sticking with his May 3 target of $1,800 for gold, even after its $100 pullback of two weeks ago.

Incidentally, Turk’s interview comes on the heels of reports out of the former Soviet Union satellite country, Belarus, that authorities there had devalued its nation’s currency, the ruble, by 36% against the U.S. dollar.

Bloomberg reported that Belarusian Prime Minister Mikhail Myasnikovich said the Russian-led Eurasian Economic Community is prepared to lend Belarus at least $3 billion in response to the crisis.

As Turk has always held, currency crises are typically foreshadowed somewhat but happen quickly and suddenly.  He expects further surprises in the months and years to come.

Newmont Mining Corp.  (NYSE: NEM)

Goldcorp Inc. (NYSE: GG)

Barrick Gold Corp. (NYSE: ABX)