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Outlook for gold prices is bullish in 2012

Gold prices have fallen 16 percent since reaching a record $1,900 an ounce – and could fall further in the near term. But many analysts predict gold prices will rise, perhaps to new records, in the latter half of 2012.

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Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna in August. Gold prices are down about 16 percent since hitting record hights in September. But analysts see a rebound coming next year.

Lisi Niesner/Reuters/File

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What is it with gold? Spot gold prices soared to a record above $1,900 an ounce in early September, dipped below $1,600 late in the month, rebounded strongly, and then fell below $1,600 again last week. That's a 16 percent decline in three months, although the shiny metal is still up for the year. Will the decline continue into 2012?

It could. Concerns about the euro debt crisis have sent investors scrambling to buy dollars as a haven from risk, rather than gold, which has caused the dollar price of gold to fall. When gold prices fell below their 200-day average last week, a technical sell signal, prices broke below $1,600 although they have recovered a little since then.

"What is surprising is that in an environment where headline risk news is bigger than ever, gold has actually fallen from its highs," Christoph Eibl, CEO and founding partner of the Swiss commodity hedge fund Tiberius, told Reuters.

With the euro debt crisis virtually certain to extend into the new year and the US economy still weak, keeping inflation tame, many analysts see gold prices could fall further. Yet, they do not anticipate any precipitous fall since gold serves as a kind of ballast to market volatility and as a store of value.

Looking further into 2012, many analysts are bullish on the precious metal. 

For technical buyers, the signal could come early, if gold can break above its 200-day average of about $1620 an ounce.

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