Analyst comments on gold reaching $2,000/oz mark

Published August 24th, 2011 - 09:24 GMT
Gold is on track to reach a historic high, then €˜the sky is the limit
Gold is on track to reach a historic high, then €˜the sky is the limit

When will it hit $2,000? “If the present western negative economical situations and investors confidence on gold as a safe heaven continues, I am expecting the next historical mark of $2000 an ounce for gold will reach in the last quarter of 2011.” Sajith Kumar  P K, Director & CEO, JRG International Brokerage DMCC.

Gold right now is carried by the same kind of momentum that drove silver up to 50 dollars earlier this year. On that basis we could reach 2,000 dollars within days as speculators got it firmly in their sight. Ole Slot Hansen, Senior Client Advisor and Commodity Analyst, Saxo Bank.

Gold price can easily reach $2,000 an ounce as early as next week. Over the four weeks gold has surged by about four percent a week. If that speed of rise sustains, $2,000 is hardly five percent more. Pradeep Unni, senior commodity analyst, Richcomm Global Services.

“Gold prices may touch $2000 an ounce, anytime. Today, the prices reached an all-time high of $1,916 an ounce. Gold prices have gone up by $400 an ounce in just in one and a half months. Every week the commodity is making a new high. Tushar Patni, managing director for Ajanta Jewellery in Abu Dhabi.

What’s putting the shine on gold?

Sajith Kumar: Major factors include S&P’s downgrading of the US and the European debt issues. Gold touched new record highs in accordance with growing speculations that the US won’t be able to resist another round of stimulus and broader worries about the global economy. If US fails to bring more stimulus packages on August 26, 2011, it will support gold to reach new price levels.

Ole Slot Hansen: The factors driving gold right now are lack of safe havens as JPY (Japanese Yen) and SFr (Swiss Franc) carries the risk of intervention but also debt problems in Europe and US and subsequent worries about the health of the banking sector have pushed bond yields towards historic lows. Moreover, momentum and speculative positioning are driving gold right as well as central banks buying gold.

Pradeep Unn: With all fundamentals intact, the latest price driver is the speculation of additional fund stimulus from the US Federal Reserve this Friday, when the Fed will host its annual retreat in Wyoming. Fed easing increases the amount of dollars in the system, pushing down the currency’s value and US interest rates.

Is it a bubble?

Sajith Kumar: I don’t see gold price increase as a bubble because gold price escalation was not a sudden jump. It was expected move and it was always showing sideways upward trend. Of course, there will be a correction for every hike. I expect healthy corrections in gold as profit booking and other investment diversifications. Major factors include S&P’s downgrading of the US and the European debt issues. Gold touched new record highs in accordance with growing speculations that the US won’t be able to resist another round of stimulus and broader worries about the global economy. If US fails to bring more stimulus packages on August 26, 2011, it will support gold to reach new price levels.

Ole Slot Hansen: It’s probably too early to talk about a bubble given the multitude of uncertainties surrounding the global economy right now but the higher it climbs the bigger the risk of a violent corrections. Should Ben Bernanke disappoint the market next weekend that could be the potential trigger for some long overdue profittaking. “The factors driving gold right now are lack of safe havens as JPY (Japanese yen) and SFr (Swiss franc) carry the risk of intervention. But the debt problems in Europe and the US and subsequent worries about the health of the banking sector have pushed bond yields towards historic lows. Moreover, momentum and speculative positioning are driving gold as well as central banks buying gold.”

Pradeep Unn: “There’s a massive bubble in gold. Gold prices have surged 33.8 percent since the start of the year and in August so far, its prices have gone up 18.25 percent since the end of July,” “With all fundamentals intact, the latest price driver is the speculation of an additional fund stimulus by the US Federal Reserve this Friday, when the Fed will host its annual retreat in Wyoming. Fed easing increases the amount of dollars in the system, pushing down the currency’s value and US interest rates.”

Tushar Patni: It doesn’t look like a bubble anymore, as the gold prices are making new highs every week. The 2,000 an ounce price barrier is a very important barrier for gold, for if it’s breached then sky would be the limit.

Gold is on track to reach a historic high, then €˜the sky is the limit.


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