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Economist Says Gold May Reach $2,200/oz. by 2014

Release Date: 
Wednesday, April 18, 2012

Gold prices moved lower with the euro today as markets reacted to continued concern over Europe's ability to deal with its sovereign debt problems. Gold traded at $1642.30 per ounce at 7:21 AM Pacific Time on the New York Spot Market with silver at $31.63 per ounce.

Concerns lingered about Spain's debt although the nation exceeded its volume target at a bond auction on Tuesday.

Shanghai CIFCO Futures analyst Li Ning said that gold market sentiment remained cautious ahead of a key policy meeting by the Federal Reserve next week, especially after comments from the Fed in past weeks caused price fluctuations. "...It's quite likely that gold will wait and take its next directional cue from the FOMC meeting next week," said Edel Tully, commodities strategist with UBS.

Gold probably will reach $1,800 per ounce in 12 months on a negative outlook for the European economy and China's real estate sector, according to Constantin Gurdgiev, an economist at Trinity College in Dublin. "I can see a rather bullish scenario for gold in the short-to-medium term," he said. The sovereign debt crisis in the euro zone and a slowdown in China's real-estate sector may drive the price of gold higher, Gurdgiev noted.

By 2014, the global economy may have started a cycle of growth accompanied by inflation, increasing demand for gold as a means of protecting wealth and pushing the price to more than $2,200 an ounce, according to Gurdgiev. "Heightened inflation prospects" will be driven by expectations of stronger demand for commodities and a large scale liquidity withdrawal in Europe and Japan, he said.

(Source: "PRECIOUS-Gold falls for fourth day as euro sags," Reuters, April 18, 2012; "Gold futures slip as global markets pressured," MarketWatch, April 18, 2012; "Gold May Advance to $1,800 in 12 Months, Gurdgiev Says," Bloomberg, April 17, 2012)

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