Gold to Hold Steady at $2025 Throughout "Very Volatile" 2012
by Brittany Stepniak
James Steel, HSBC analyst, anticipates that gold will trade between $1,700 and $2,300 over the course of the following year. According to him, markets are likely to continue many series of volatile trading sessions for at least the next calendar year.
This year, gold appeared to more heavily influenced by what was going on in currency markets more-so than anything else. And the rule-of-thumb is that weakened dollar indexes push gold upwards, as it extends itself towards a secure position as a safe haven for many investors.
BUT, the unique factor in the mix this year is the fiscal crisis in Europe. As the European economy continues to weaken and decline, gold is able to keep a relatively solid position as a safe-haven regardless of what's going on with fiat currencies.
Take a look at this 1-year-gold chart to visualize the trend in lieu of market changes and fear for the global economy:
Image courtesy of kitco.com.
Continued uncertainty in global markets will certainly be beneficial for gold bugs. Without confidence in other matters of the economy that are seemingly uncontrollable at times, gold is always there as a tool to restore confidence.
Still, gold demand is driven by many other factors un-related to its status as a safe-haven. Those factors combined with the safe-haven aspect of it have kept gold demand strong over many, many decades.
But, as confidence in other economic factors goes up and solutions solidify themselves over in Europe, gold's success may take a slight hit.
"If you look at this longer term, we've had one form of crisis or another since the middle of 2007. What started off as a local North American sub-prime mortgage crisis, morphed into a US credit crisis, into a global financial crisis, into a global economic crisis and by the beginning of 2010 it did become a sovereign risk crisis. So we've really had five incarnations of this crisis - and each time gold has rallied a couple of hundred dollars so it shows that gold has over the long run fed off this crisis."
That said, Steel does expect any drop in demand from the West will be " well cushioned by emerging market interest in gold" because "China and India, given their long run projections of increased income and their greater weight in the world, are an important factor in sustaining a long run bull market."
If you are concerned about what's going to change next year, it doesn't sound like it'll be much...Experts still expect abnormally high levels of market volatility that'll keep gold soaring high. Analysts with HSBC say the average price for the year 2012 will be right around $2025 – quite a decent spike from today's price.