Gold likely to continue its multi-year rally
Gold’s golden run is all likely to enter the new year with a bang as the much awaited Europe agreement on debt crisis failed to evoke any reactions that could prevent the precious yellow metal.
Analysts said the latest devolopment added more pressure on the euro and heightened gold’s safe haven appeal.
They added that possibilities of a new announcement of quantitative easing by the US Fed also brightened gold’s appeal running into next year.
The volatility of and high correlation between asset classes such as government bonds, equities and FX means that gold has retained favor amongst investors.
With this backdrop, gold is likely to continue its multi-year rally, and yet may still be subject to periods of intense liquidation when risk-aversion is particularly high.
The fundamentals for gold are further supported by a limited response from new mine supply, analysts said.
Most analysts believe that gold may reach $2,000 an ounce sometime in 2012 and thereafter may rise to about 2,300 an ounce, which is approximately the inflation-adjusted high reached in 1980.
Gold saw a sharp correction from its closing high of around $1,900 an ounce in early September, this being attributed to investors selling gold to cover margin calls and losses in other asset classes.
Another factor driving the correction in gold was the increase in margin required to invest in gold futures at the CME Group, it was announced on Sept. 23 that initial margin for COMEX gold futures would rise by 21 percent. – BullionStreet
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