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Analysts Look Long-Term at Gold

Release Date: 
Thursday, December 22, 2011

Gold prices were slightly lower on a higher dollar, as the euro dropped on continued fears over sovereign debt levels in Europe. At 7:00 a.m. Pacific Time on the New York Spot Market, gold traded at $1610.50 per ounce with silver at $29.36 per ounce.

Gold is approximately 13% higher for the year and several analysts expect a continued rise over the next few years.

"People get so caught up with the next three minutes for gold and they should really be focused on the next three years," says Frank Holmes, CEO of U.S. Global Investors. "Does anyone really believe in the long term strength of the U.S. dollar?"

Leo Larkin, metals and mining analyst at S&P Capital IQ, says gold may reach $1900 per ounce in 2012. "Gold has been going up without interruption for 10 years," Larkin said, noting an annual average rise of 17% during that period. He expects gold to continue its rise in 2012.

Anne-Laure Tremblay, precious metals analyst at BNP Paribas, said increased central bank liquidity should support gold prices in 2012 and lead to a potential increase in inflation expectations. "Gold should also be boosted by strong physical demand, notably in Asia and Europe," Tremblay said. BNP Paribas forecasts that gold will average $1,775 an ounce in 2012 and $2,150 an ounce in 2013.

"What I am looking for is a gold price of $1,800 an ounce in 2012," said Jeffrey Wright, senior research analyst at Global Hunter Securities. The analyst noted the possibility of price rises to $1,900 or $2,000, particularly if Congressional gridlock and budget battles emerge over U.S. fiscal issues. "Once we get back into those discussions, there will be further pressure on the U.S. dollar and a refocusing on gold as a safe haven asset."

(Sources: "PRECIOUS-Gold slips as dollar rises to session high," Reuters, December 22, 2011; "Gold Prices Poised for 11th Year of Gains in 2012," TheStreet.com, December 22, 2011; "Gold ends lower, logs sixth loss in eight sessions," MarketWatch, December 21, 2011)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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