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Higher Gold Prices for 2013?

14 December 2012no comments Latest Market News

Gold has shined again so far this year adding 10%; robust jewelry demand, continuing uncertainty with “Fiat Money” and QE has supported Gold prices. Quantitative easing can lead to inflation because of spending that derives from it. Spending can lead to growth for which then can lead to higher product prices because of the stronger demand.

Can this bull market keep moving higher?

These factors will again prevail in 2013 for the reason that nothing economically or sentimentally has changed. On December 12, 2012, the Federal Reserve has made a pledged to continue with monthly purchases of 45 billion dollars worth of mortgage backed securities, until the unemployment rate comes down to an average of 6.5%. Currently the unemployment rate is at 7.7%  and for the last 4 years its only come down about 1.3 percentage points with over 1 trillion spent by the Fed. How did gold perform during that period? The price double!

What is the Federal Reserve’s objective? By purchasing mortgage backed securities or long-term treasuries, their objective is to push long-term borrowing costs lower for consumers and business to facilitate an economic expansion.  Gold can benefit in an inflationary environment since it is viewed under conventional financial planning as a hedge against it.

Other factors that can propel gold prices are geopolitical tensions, such as Iran. Iran’s nuclear ambition has lead to the Western World accusing its ambition for creating nuclear bombs not energy. Both the United States and Europe has already implemented hefty sanctions against them such as banning their oil in the US and Europe as well banking institutions from accepting money from them.  If tensions escalate, gold prices can propel higher since investors buy it as a store of value, wealth or safe heaven.

2013 is looking very bright for gold and its shine appears to be getting brighter!

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