Gold Prices Expected To Continue To Rise Under Loose Monetary Policy, Public Debt Worries

BERITA-BERITA PENTING TENTANG KENAIKAN HARGA EMAS DARI KITCO NEWS

Wednesday August 10, 2011 12:59PM

(Kitco News) - Gold prices have set a series of record nominal price highs in recent days and market watchers expect the yellow metal to continue to press higher. The continued economic uncertainties – whether it is public debt in the Western countries or inflation in emerging markets – combined with the Federal Reserve’s declaration to keep U.S. interest rates floating between zero and 25 basis points until mid-2013 make gold an attractive asset.

This week several investment banks raised their forecast for gold prices. On Monday HSBC lifted its average price for 2011 to $1,590 an ounce and for 2012 to $1,625. Goldman Sachs raised their three, six and 12-month average price forecasts to $1,645, $1,730 and $1,860, respectively. On Tuesday, Commerzbank increased their third quarter average price outlook to $1,700 and the fourth quarter 2011 and first quarter 2012 to $1,800.

Kitco News interviewed several veteran market watchers for their outlook for gold prices this year and into the first quarter of 2012.

“Everything points to more support for gold. We’re at $1,769 (an ounce) right now. With low interest rates (in the U.S.) that’s supportive because there are inflation concerns that can happen further out.” “Political prevarication” in both the European Union and the U.S. in dealing with their respective debt issues is another reason to give gold a boost. Prior to Standard &Poor’s downgrade of the U.S. debt rating he forecast gold rising to $1,800 by year’s end, but “I have to work on a new forecast for further upside.”

Afshin Nabavi, head of trading, MKS Finance

“As long as there are no solutions to the financial problems of the U.S. and the European Union, the market will continue to go higher…Any kind of short-term correction would be a good dip to buy into.” How high can gold go yet this year?  “As they say, the sky is the limit,” he says with a laugh. “We saw $1,782 yesterday. $1,800 is probably the next psychological level. If that goes, we could head for the $2,000 area. It all depends on if they find any kind of solutions. “Technically, we haven’t had a correction since $1,580. We will see it (a correction) eventually once things calm down. But until then, we could continue to go higher and higher.”

George Gero, vice president and precious-metals strategist, RBC Capital Markets Global Futures

“For the time being, we are leaving our $2,000 price target for 2012 unchanged. However, as we outlined a few years ago the likelihood of a bubble developing in the gold market is a high probability event given the appetite to buy gold when the US dollar is rising and falling, and to buy gold to hedge against inflation and deflation. On the indicators we measured and published in June last year, the gold price would need to hit USD2,960/oz to bring the gold price relative to the S&P500 back to the levels of the 1930s. For the time being this is not the economic scenario that we are forecasting, but, events in recent days have certainly moved us closer to this outcome. According to the gold options market, the probability of the gold price trading at the $1,800 level for the foreseeable future is a high probability.  However, a move lower to $1,600 is considered a more likely scenario than a rise to $2,000. A view we do not share.”

Sterling Smith, commodity trading adviser and market analyst with Country Hedging

“Gold is getting overheated from a technical point of view. That said, the current environment is rather difficult and unique. Demand remains retail and institutional investors remains well-supported. Given the condition of the current global financial mess, despite its overheated nature I remain bullish on gold. In the near-term (Comex December gold) could go to $1,829 and beyond that $1,863. If something extreme happens, given the U.S. downgrade, gold is the safe haven given the ridiculous appreciation of the Swiss Franc, we could see $2,000 gold by Labor Day, but I doubt it. By the end of the year we could see $2,200-$2,250 which would about equal the inflation-adjust high set during the Carter administration.” Is gold going parabolic like silver did? “It’s acting a little like it, but gold’s characteristics are different. You have a little better holder in gold, less Michelle Bachman like in their behavior. If we put together a gold rally of up $400 two days in a row, then there would be serious parabolic concerns.”
Kevin Grady, gold trader on Comex floor, MF Global