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GFMS Forecasts Gold Over $1900 in 2012

Release Date: 
Thursday, April 12, 2012

Gold prices moved higher today, trading at $1672.50 per ounce at 7:14 AM Pacific Time on the New York Spot Market with silver at $32.31 per ounce.

Concerns over the U.S.'s economic deepened following Thursday's jobs report which showed initial jobless claims increased by 13,000. This was the largest weekly increase in nearly one year. "If the macroeconomic indicators are weak, we could see some investors going back to gold's safety," said Phillip Futures analyst Lynette Tan.

Philip Klapwijk, global head of analytics for Thomson Reuters GFMS, said the record price for gold near $1,900 an ounce could be "taken out, and a push on towards $2,000 is definitely on the cards before the year is out..."

"The broader macro environment still remains positive. In the near term, the floor will be set by a combination of how strong investment demand is and how responsive the physical market is," said Suki Cooper, a precious metals analyst at Barclays Capital.

Frank Holmes, U.S. Global Investors CEO & CIO, noted two key drivers for gold: the "fear" trade and the "love" trade. "The fear trade relates to the monetary base. Gold has been running at ruffle two times the monetary base. This year, Europe, America, and Japan are going to roll over $8 trillion in short-term three-year notes below the inflationary rate. This has always basically been a strong support for the price of gold for those people worried about the currency losing their valuation long-term."

Holmes continued, "the love trade takes place predominantly in Asia where people buy gold for holidays. The seasonal pattern is January, February, with the Chinese New Year it is up, and falls in march. That's what it did this year. ...We are going to have the Hindu holidays at the end of April. You can see demand coming from the love trade."

 

(Source: "Jobless Claims Jump," Wall Street Journal, April 12, 2012; "PRECIOUS METALS: Gold a Touch Lower In Cautious Asian Trade," Dow Jones, April 12, 2012; "PRECIOUS-Gold steadies as debt crisis looms over euro," Reuters, April 11, 2012 "Can Gold Continue to Glitter?" CNBC, April 11, 2012; "Gold Eases After 4-Day Rally; Palladium Off," CNBC, April 11, 2012; "Gold inches lower, gives back previous gains," MarketWatch, April 11, 2012)

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