Will New Credit Cycle Skyrocket Gold Price?

Looks like Fannie is at it again.Perhaps experimentally, but nonetheless . . .In a Sunday New York Times article we read that Fannie Mae is working in conjunction with certain states to offer no down payment loans to new homeowners.

Then, according to a Wall Street Journal article today, we learn that another program has been launched to help bailout between 500,000 and 1.5 million homeowners with underwater loans."The process involves refinancing borrowers into loans backed by the Federal Housing Administration."

Let's not stop there.How about we throw in some token tax cuts for business topped off with another $50 billion ear-marked for infrastructure spending?

I'm not even going to get into the "been-there-done-that debate" but we've already been there and done that.I'm still waiting to see how the previoulsy planned $800 billion in shovel-ready projects will be spent.

Bottom line is, we are seeing pretty clear evidence the path to be taken to recovery is that of more stimulus and more spending.As far as I am concerned that debate is over.Even the higher taxes argument is losing steam as a common theme today is tax breaks for business.

Yes, the pump is about to be re-primed in hopes the economy will start cash-flowing once again.To what extent?It makes sense to believe, if the amount of stimulus in round one wasn't enough to get the economy moving again, that we need to up the stimulus.You can't just do the same thing again and again and expect a different result.That's called something else.

So, if we resign ourselves to more stimulus, what does that mean for the Gold price?I think all we need do is look back over the last couple years to get a sense where gold may be headed.Gold's low during this time, can be observed in October 2008 below $750 an ounce.Today, spot gold is solidly above $1250.That's better than a 65% move higher.

Does history guarantee a repeat performance?Never!But it is hard to imagine gold prices somehow reacting negatively to another round of stimulus.Where would that put the gold price two years from now?Now we're talking about gold at that once lofty target of $2000 an ounce.

But, by all means, don't expect that and certainly don't plan for it.Just take it for what it is.Another sign gold prices may be headed higher - a lot higher!If that does not make a case for gold diversification, I don't know what does.

With Gold demand and prices moving higher today, in spite of some dollar strength against the Euro, it appears we're not alone in the universe of people that believe the price of a gold coin tracks stimulus spending.More stimulus, more inflation and gold is definitely the beneficiary of that sentiment.

For more information on Gold and the markets, visit LearCapital.com for more breaking news, live gold prices, real-time charts and Free Special economic reports.