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Save Investments: Go for Gold

Save Investments: Go for Gold

November 8, 2011 2:21 by

In recent weeks gold prices have been flirting with the magical figure of $2,000 an ounce, and analysts 
say that the popular yellow metal will 
cross that figure by the end of this year.  Precious metals, especially gold, have time and again proved to be an elixir of economic life.

As the euro struggles to keep its head above water, the recent downgrade of Italy by Standard and Poor’s has added more troubles to the fairly troubled euro zone. With the economic climate in the United States turning murkier, traders and investors have been making a beeline in global markets to get their piece of gold. The result: record-high gold prices.

Chief Executive Officer of Newmont Mining Corporation, Richard O’Brien, said during the Denver Gold Forum, that the gold may rise to $2,000 an ounce by the end of this year, and $2,300 an ounce by the close of 2012 because of investors buying the metal as a haven amid turmoil in
 financial markets.

“We’re going to continue to be in a bullish gold-price environment for the next five to seven years,” said O’Brien, according to Bloomberg.

Gold climbed to a record in early September and is in the 11th year of a 
bullish market, the longest-winning streak since at least 1920 in London, reported Bloomberg. It touched a record $1,921.15 on 
September 6, advancing by 25 percent this year. But is gold really a safe haven?

Saxo Bank’s global head of FX options and forward training, Gustave Rieunier, says ‘yes’. Gold and other precious metals have been in great demand because people see them as a safe haven,” he said. “Global economy and capital markets are struggling and we have seen a great inflow in the buying of Swiss francs, seen as a safe investment, but after the Swiss government decided to weaken its currency, there are very few options left that are safe. One is gold.”

It may not be an exaggeration when market insiders say gold prices are likely to cross $3,000 an ounce. “It all depends on whether we are in a bubble or not, but the speed of increase seen in gold suggests that it may go beyond $3,000,” said Rieunier.

The World Gold Council, in its recent report, said although the prices are skyrocketing the demand is not slowing down. Despite a higher gold price, Indian and Chinese demand grew by 38 percent and 25 percent respectively during Q2 2011, compared to 2010.

This growth is likely to continue, due to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals in India and China, said the report, adding that the impact of the European sovereign debt crisis, the downgrading of US debt, inflationary pressures and the still-fragile outlook for economic growth in the West are all likely to drive high levels of investment demand for the foreseeable future.

Head of precious metals at Emirates NBD, Gerhard Schubert, said, “The Gold price has been holding very well and the current price is still within the 10 per cent correction level already seen. When the price fell from $1,912 to $1,703 it was the correction and everybody was expecting some sort of correction.”

This article was originally published in our sister publication Trends.

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