The chief economist at HSBC Bank, Robin Bew, suggests that the price of gold will correct down to $1,390/ozt by the end of 2012 and to $1,000 per troy ounce by 2013. [Let’s examine Bew’s views more closely.] Words: 731
So says Stuart Burns (www.metalminer.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
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Burns goes on to say, in part:[HSBC] states [that] there is nothing special about the nature of gold that makes it an ideal safe-haven asset because, were it not for its widely perceived role as just that, gold would behave like most commodities and rise in value during good economic times when demand for its industrial uses increases. Of course, gold has limited industrial uses and, if that were the only source of demand, the price would behave exactly as he suggests. The problem, [however,] is the quasi-financial role that gold has — not quite a currency, but treated as if it were – which imparts it with a special status. Like all currencies, though, it can rise or fall depending on [a variety of]circumstances. Upon accepting that the world has somewhat arbitrarily assigned gold this role, we must review a number of factors that support gold’s price prior to predicting how these may develop in the year ahead, [namely,].
Gold’s safe-haven status: As Bew points out; since Lehman Brothers collapsed on Sept. 15, 2008, the price of gold has more than doubled. Demand from investors rose by 73% from 2007 to 2009 and another 24% in 2010, along with demand for other safe-haven assets like US treasuries and the Swiss franc. The yield on all such government debt – US, German, Japanese — has been historically low for much of the last three years with the exception of early 2011, when the community went risk-on and moved out of safe havens and into commodities and other riskier assets. Recently, though, sovereign debt has been very much back in the news and gold has benefited from its safe haven status as the euro has seemed on the point of collapse and the U.S. government seems unable to reach agreement on budget cuts.
The fear of inflation: Indeed, in 2009-10 many were attracted to gold as a hedge against the potential for rising inflation as the global economies bounced back in an extremely low-interest and loose monetary environment. HSBC… [however,] …does not see any significant risk of a rise in inflation in the early stages of what will be a weak and prolonged recovery phase. They are expecting a gradual US recovery starting later this year and observe that Japan is already returning to some sense of normality after the natural disasters early this year.
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Why Much Lower Gold Price is Expected
As interest rates rise, the attractions of financing investments in gold will be reduced compared to other asset classes. As a result, the bank expects the price of gold to average $1,390/troy ounce in the fourth quarter of 2011 and fall to $1,000/troy ounce by mid-2013… [providing] the recovery occurs as expected and inflation remains subdued…
As such, some may question if gold really represents such great value [even at its current depressed price], or if they would be better off taking ]what] profits [they have made to date, if any,] while they can.
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The price of gold is still in the “Plunge” phase of the “Three-Peaks and a Domed House” pattern [and is projected to drop to the lowest price of the enitire pattern which is $1,300 per troy ounce. Yes, $1,300! Words: 868
In the long run developments in the financial markets and around the world seem to conspire to whip up a perfect storm for the gold price, taking it up towards $2,000 and further. That new upleg, however, could very well start from a much lower level than now. There are quite a few developments that could easily send the gold price lower in the coming months. Is $1,200 gold in the cards? Words: 739
The past few years have seen the development of the notion that GLD and SLV represent uncorrelated plays on the market, making them safe haven bets for your portfolio. Looking at historical trends (aside from 2011), [however,] one would have to go back to 2007 to find a year where these two metals weren’t highly correlated to the S&P 500. For all of 2011, both ETFs have featured low correlation, but as recent trading weeks have shown, old habits die hard, as the two ETFs have fallen back into a highly correlated trend. Let’s take a look at the particulars.] Words: 672
A Barclays Capital research [report] notes that gold prices are vulnerable to a recession – more so than some of the other commodities. In the last recession of 2008, gold prices appreciated the least among precious metals. Below is a table that ranks 30 different commodities. Words: 571
If there is one thing we’ve learned about gold in recent years – and recent days – it is this: gold is not a haven investment… There are many theories about gold’s correction. [Let’s take a look.] Words: 781
Is physical gold the best available ‘safe-haven’ or is it the U.S. dollar – or perhaps even U.S. Treasuries? Words: 793
As investors look for safe havens in a potential market panic, I am reminded of the adage, “In the land of the blind, the one-eyed man is king.” Today, I see several metaphorical one-eyed men in this land of the blind that could serve as safe havens were there to be a market panic. All of them have significant flaws. In this post I would like to discuss them one by one. Words: 780
Why is gold falling as the financial crisis worsens? After all, isn’t gold some sort of safe haven? [Let me explain.] Words: 1287