A seller counts gold rings in a jewellery of the Old Bazaar in Goldsmith street in Skopje on Aug 19, as gold spiked to another all-time high this week as slumping global stock markets sent investors fleeing for the safe-haven precious metal, while industrial metals dived on the back of a weak demand outlook. (AFP)
‘Gold price could hit $2,000 in 2012’

KUWAIT CITY, Aug 20: After Gold achieved our target of $1,700 we are revising our estimates, and have come up with an analysis of where prices are headed over the next 3 to 6 months, by mid 2012.
The price of gold could hit $2,000 a troy ounce over the next year, Aberdeen Asset Management has predicted, as investors look for a safe haven for their money. The precious metal soared to a record high of $1,814.90 an ounce earlier this month as investors fretted about the prospects of a debt crisis in the euro zone and US. It has fallen back since then, but the bleak picture the world is in gives it tremendous support and may even prove as a catalyst for further moves on the upside.

The market frigidness over the bleak picture in the global economy and the lack of traders willing to take any risk could propel the price of the metal to newer highs over the next year. The shift in the dynamics of the world over the past years have brought gold to this level, but the negative interest rate environment (inflation rate subtracted from the nominal interest rate) the world finds itself in these days is leading to declining purchasing power in the respective currency’s and the rising risk of defaults form leading industrial nations is the catalyst that the metal needs to push it to new highs. If we compare to the past, inflation-adjusted price of gold, it is still off by $500 (gold all-time high set in 1980 of more than $2,300an oz. ounce inflation adjusted).
For Chinese investors there is nothing out there except for gold, with their real savings rate at a negative rate (the inflation rate subtracted from the nominal interest rate). And the warnings they get from their local council men in their local governments that land and real estate prices were set to fall. They have hoarded gold.

UBS Raises Gold Forecast on Growth, Debt Concerns. The Markets weary over slowing demand and more so the burdensome debt issues in the industrial nations continue to push prices of the metals higher, as investors seek safe haven investments. To compound matters the central banks continued buying has pushed gold prices higher. UBS raised its three month forecast to $1850 from $1600 due to the aforementioned reasons. Another report indicated that US consumer spending dipped in the past month raising worries over a slowing US economy and the implications to the world economy. Moody’s Investors Services said the outlook for the US debt grade is placed on negative watch after President Obama signed into law the debt limit increase while cutting spending without any revenue increases.

“A barely expanding US economy and its implications for the world are now at the forefront of investors’ minds, helping gold push to records,” said Edel Tully, a London based analyst at UBS AG, in a report. “Neither European nor US debt issues have been comprehensively dealt with. Data since last Friday have increased expectations for further quantitative easing (QE3) by the Federal Reserve “she said.
In the Euro Zone, both Italian and Spanish bond yields rose to record-levels in the Euro history and these levels reached are considered as unsustainable. “If you look at the European Bond Markets, you will see yields on Italian and Spanish bonds are back above 6%, so this crisis, unfortunately seems to be spreading to Italy and Spain, which is potentially more serious than Greece, because they’re much larger,” said Jesper Dannesboe, senior commodities strategist at Societe Generale. “Gold is reacting to this and that is the main driver right now.”

The International Monetary Fund said in its monthly report on central banks and their reserves that the Thai, Russian, and Kazakh Banks among others have added gold to their reserves in the past couple months as they diversify their balance sheets. “Central banks around the world need to buy hundreds of tons a year,” said Eugen Weinberg, an analyst at Commerzbank AG.


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