The long-term outlook for gold still remains bullish, with prices expected to rise as high as /bookkeep,000/oz in the coming months.
Gold is down some $80/oz from the highs we saw last week and additional downside moves are likely, however the long-term outlook for gold still remains bullish, with prices expected to rise as high as $2,000/oz in the coming months.
Given gold's recent run, it is not surprising that we have seen price corrections but we didn't see the great shopping season correction that you typically get over the summer. That doesn't mean it can't happen now. If broader market concerns affect the resource sector too, we could well see falling gold prices. If not, then remember the longer-term trend, and remember that gold typically does really well in the autumn. In light of the poor economic outlook, rising mining costs and the Federal Reserve Bank maintaining a low rate though mid 2012, gold forecasts are higher and thus reflect the opinion that gold will continue to act as a safe-haven asset.
Experts pointed out that considering the instability in the US and the Eurozone, gold will climb as investors try to invest in safe-haven assets, whose range is constantly shrinking. According to Goldman Sachs we can expect the price of gold to reach $1,860/oz, while JP Morgan predicts the maximum price at the end of the year to be $2,500. Don't stay out of the market because something could go lower, based on the above forecasts there is still time to invest in gold, before it climbs higher.
Concerns over the Eurozone arose again as, Angela Merkel and President Sarkozy met to try and work out measures to resolve the crisis, but Germany and France have both reported virtually flat economies; so where is the help going to come from?
Central banks were net buyers of gold for the second successive quarter. Banks included were that of Mexico, Thailand, South Korea and Russia. Central banks' transformation from net sellers to net buyers caused overall gold supplies to go down 4%, despite a 7% rise in production. Normally you would expect more scrap gold being recycled back into the market, but scrap sales also fell 3%.
The 'love' trade is also certainly favourable for gold at the moment, together India and China account for over 50% of gold demand. Strength in the market remains concentrated in Asia, with buying of coins, bars and jewellery all declining in Europe and the US. The World Gold Council stated that rural housewives in India hold roughly twice the amount of gold that the U.S. has stored in Fort Knox. When the love and fear trade show up together, gold will reach even higher highs, so now would be a good time to buy gold.
"That a majority of respondents expect gold to end the year above current very-elevated levels suggest that the macroeconomic backdrop is expected to remain supportive and that September will again bring a traditionally strong seasonal physical demand," claims the Swiss bank UBS.
At the time of writing gold has risen further to pass the $1890 mark in Europe. Whether gold continues to skyrocket, settles into a new trading range around recent levels, or plummets as high prices discourage buyers and encourage profit-takers remains to be seen.
At some point, however, we will see a correction, perhaps a sizable one. Gold prices are up more than 36% over 12 months and when it moves that quickly, there is a 90% probability of an 8-15% correction.
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