Rally in investor interest to see gold reach $2,000 mark
Resurfacing fears over Eurozone sovereign debt, particularly Spain's creditworthiness, is expected to see investors again gravitate towards gold leading to a price rally towards the $2,000 mark by yearend, a precious metal consultancy forecast Wednesday.
But before that happens, Philip Klapwijk, head of metals analytics at GFMS foresees gold price dipping to "perhaps below $1,550 in the next month or two".
The metal last week touched a three-month low of $1,611.80 a troy ounce and on Wednesday was trading at $1,659.
Given the geopolitical scenario, the next wave of surge in prices could happen before year end, the Thomson Reuters GFMS consultancy has forecast for the yellow metal, which has seen prices scale over 500 per cent in the past decade.
In the medium term, Klapwijk states, "We could easily see last September's record high being taken out, and a push on towards $2,000 is definitely on the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of next year."
The resumption of acute fears over Eurozone sovereign debt, with Spain set to be the new principal area of concern, is expected to be one of the main drivers of this reversal.
In addition fears that over the next few months the US recovery will begin to falter, forcing the Federal Reserve into taking additional monetary policy measures, are some other factors Klapwijk puts forth for his forecast.
"Both developments were expected to lead to a period of further monetary easing and not just in the industrialised world, with China, India and Brazil becoming obliged to adopt additional loosening strategies," Klapwijk noted.
Fears about resurgent inflation, expected rise in oil prices due to tension over Iran and the US, are other factors that could fuel investor interests this year.
Conversely many of the same factors were present in 2011, but the total investment actually dipped in tonnage terms as selling centred on the futures and OTC markets, which stemmed from liquidity squeezes, profit taking and technical selling, outweighed a bumper year for physical investment.
Nonetheless, in approximate value terms, net World Investment rose by a healthy 15% to a record level of just over $80 billion.
Klapwijk said that there was a "substantial" rise in demand for physical gold, as opposed to paper gold products in most parts of the world except the US . Demand for bars rose by 37% year-on-year to 1,209 tons. This accounted for some 75% of all investment, he said.
"We had very strong demand globally for gold bars," he said. "The question, of course, is whether we can expect to repeat this year such a strong number. Buyers of gold were looking forgold in its purest form."
The Gold Survey report points out that despite soaring prices, "gold was clearly dependent on emerging markets' economic strength as China's jewelry demand grew to a record level, while India's fell by less than 3%."
GFMS reported an overall increase in gold demand during 2011 to 4,486 metric tons, up 0.6% from 4,459 in 2010.
Source: Europe News.Net
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