Gold surge has analysts looking for more
25 Apr, 2011 08:06
Over the last four months period almost all commodities have outperformed investors expectations with gold smashing through $1500 per ounce.
Since the beginning of the year gold prices increased by 6% amidst increasing investor anxiety over macroeconomic risks, including inflation in emerging markets, the risk of a sovereign default in the Eurozone undermining the Euro, and national debt levels around the world, underlined when ratings agency Standard & Poor`s put the United States on credit watch negative and warned about the budget deficit of the world largest economy.Dmitry Balkovsky, Head of Goldenfront.ru, said that these factors were all pushing investors towards gold, with confidence in national currencies ebbing.“The Price of gold is a mirror of macroeconomic stability and the price increase shows a lack of confidence in money and governments that print it.” Bank of Moscow analyst, Yuri Volov, believes investors will remain bullish for gold with confidence in the regulatory framework of the global financial system weakened, and says the price will go higher.“Gold is the only attractive alternative to protect investor’s money from depreciation. In the current economic situation the gold prices are rising, reflecting economic volatility and instability. Gold is more or less independent from currency fluctuations which gives it advantages. Lest you forget, all developed economies have at least part of their reserves in gold for protection. All regulatory measures and decisions pushed by the governments look uncertain. We can see the European central bank has increased rates on short term bonds by 0.25 pp from 1% to 1.25%. That move, if continued, can have a short negative impact on gold prices as soon as bonds yields increase. But this scenario is very low in probability. I believe, the price of gold will reach $1600 per ounce over the year.” Dmitry Balkovsky, Head of Goldenfront.ru, said that the economic value of money is decreasing and gold could become a more significant reserve currency globally. He sees gold continuing to firm until well into next year with the world still lacking clear signs that a global economic rebound is sustainable. “Gold is a tremendously attractive by all means. It has been used for decades in the past as a robust regulatory instrument maintaining all economic relations. Today this precious metal economic value can be successfully applied to regulation policy and revitalize our economy. Unless major developed economies get rid of gold reserves gold will continue to grow in value and the price can reach $1800 in he 1Q 2012. I don’t see any positive signs of economic rebound.”