The macroeconomic environment in 2012 was set for insecurity, instability and increased anxiety. The EU will have to choose whether to print money or face a recession; U.S. policy remains difficult, and growth in China and India has slowed.
Gold prices reached six-month lows in December 2011 when they were under pressure from investors and banks seeking money and weak physical demand from China. They have been recovering steadily since then, but are hovering below the 200-day moving average of $ 1,634. However, yesterday (October 1, 2012), gold finally broke through this barrier, which suggests that gold can now gain some momentum and start growing more stably.
Murenbeeld, chief economist at Dundee Wealth Economics, sees the monetary ratio (or quantitative easing) as a key bullish factor for gold prices. If Europe wants to avoid a recession, it may be necessary to launch a version of quantitative easing, if that happens, there is no data on where the price of gold will end up.
In the short term, the strength of the US dollar is the most limiting factor for gold prices. However, it is basically overrated and as such Congress could force a ‘devaluation’ which in turn would be good for gold.
Despite the recent slowdown in China, the demand for gold remains strong thanks to growing wealth, fears of inflation, easing of monetary policy and of course the approaching Chinese New Year. However, if the Chinese economy sinks into recession, gold prices could be pulled down.
Most banks lowered their gold price forecasts for 2012. HSBC’s chief commodity analyst, James Steel, changed its forecast to $ 1,850 based on a weak euro, liquidation and disappointing physical demand from emerging markets. Barclays forecasts an average of $ 1,875, and Deutcsche Bank lowers the average forecast to $ 1,825. However, all of these adjusted forecasts can still be considered bulls given the current gold price of around $ 1,630.
According to the annual survey of industrial forecasts of the London Association of Leverage Markets (LBMA), the 23 largest banks in leverage predict that gold prices will exceed the highest $ 1,920 touched in 2011 and could exceed $ 2,000 in 2012.
Negative real interest rates and the purchase of gold from central banks will continue to support the attractiveness of buying gold. The amount of physical gold available is declining thanks to the demand of emerging economies and the accumulation of central banks. As a result, increased investor demand is likely to lead to a long-term trend of higher gold prices, which will cause the average to rise in the next few years.
This year, gold prices are likely to be just as volatile as in 2011 with large gains, often accompanied by declines that could put investors in doubt as to the gold asset class. Golden bears may have been everywhere before the end of 2011, predicting a low of $ 1,000 or less, but they were wrong just like in the past, and now gold has shaken off a year-end loss and is preparing for another bull race, so if you want more this may not be the perfect time to invest in gold.