What Will Happen To Gold Prices in 2012?

What Will Happen To Gold Prices in 2012?

The macroeconomic ecosystem in 2012 is set for uncertainty, volatility and heightened anxiety. The EU will have to choose whether to print money or confront a recession; US politics keep difficult and China and India’s growth has slumped.

Gold prices hit six-month lows in December 2011 when they came under pressure from investors and edges seeking cash and ineffective physical need from China. Since then they have steadily recovered but hovered below the 200-day moving average of $1,634. However yesterday (10/01/2012) gold finally broke this obstacle which indicates gold may now gather some momentum and begin rising more steadily.

Murenbeeld, Chief Economist at Dundee Wealth Economics, sees monetary relation (or Quantitative Easing) as the meaningful bullish factor for gold prices. If Europe is to avoid a recession it may well be required to set afloat a version of quantitative easing, if this happens, there is no telling where the gold price will end up.

In the short-term, the strength of the US Dollar is the most limiting factor for gold prices., However, it is fundamentally overvalued and as such Congress could force a ‘devaluation’ which would in turn be good for gold.

Despite the recent slowdown in China, need for gold remains strong thanks to rising wealth, inflation fears, easing monetary policy and of course the approaching Chinese New Year. However, if the Chinese economy does sink into a recession, gold prices could be dragged down.

Most edges have lowered their gold price predictions for 2012. HSBC’s chief commodity analyst, James Steel, changed his forecast to $1,850 based on a ineffective Euro, liquidation and disappointing physical need from emerging markets. Barclays forecast an average of $1,875 and Deutcsche Bank cut its average forecast to $1,825. However, all of these modificated forecasts can nevertheless be viewed as bullish considering the current price of gold around $1,630.

According to the annual survey of industry predictions by the London Bullion Market Association (LBMA), 23 of the largest bullion edges have expected that gold prices will surpass the high of $1,920 touched in 2011 and may well go beyond $2,000 in 2012.

Negative real interest rates and gold purchasing from central edges will continue to sustain the allurement of buying gold. The amount of physical gold obtainable is shrinking, thanks to need from emerging economies and accumulation by central edges. As a consequence increased need from investors will likely rule to a long-term trend of higher gold prices, causing a rising average over the next few years.

This year gold prices are likely to be as volatile as they were in 2011 with big gains, often followed by declines that may rule investors to doubt gold’s asset class. Gold produces may have been everywhere towards the end of 2011 predicting lows of $1,000 or less, but they were wrong just like they have been in the past and now gold has shaken off year end loses and is preparing for another bull run, so if you haven’t already this may be the perfect time to invest in gold.

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