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The Crisis and Commodities -
Possible Outcomes for Late 2012

Experts are predicting major changes on financial markets and in national economies for autumn 2012. Of course, the predictions (as we have gotten used to) are negative and therefore a higher gold price is expected.

In summer 2011, gold has hit an all-time high approaching 2,000 US $ per ounce, stopping at just under 1,900 US $. After that it inclined back, falling and later climbing, but not reaching 1,800 US $ again.

In late 2011, gold fell well under 1,600 US $ around New Year's Eve, but early 2012 brought a sharp increase, which peaked at 1,776.60 US $. Then gold's price fell again under 1,600 US $. Some even speculated gold will reach 1,500n before it reaches 2,000.

Nevertheless the lack of QE 3, reports of slight improvement of the US economy, the careful declarations of Ben Bernanke slightly discouraged gold investments. In late spring and until late summer 2012, we've seen gold trading sideways - which means uncertainty.

The intensification of the European debt crisis acted as a helper for the US dollar, which strengthened as opposed to gold weakening.

Experts say there will be another quantitative easing, but most likely this will either happen in autumn or later this year.

The immediate effect will be a sharp increase of commodity prices, potentially sending gold above 1,800 USD, silver above 35-40 USD.

The worse the euro zone's crisis becomes, the better it will be for the rival currency, the US dollar. And because the price of gold is measured in US dollars, the latter might come out as the winner. Although, the euro crisis can also stimulate Europeans to buy commodities, especially gold (silver being far less popular in Europe than in the USA). This would certainly increase gold's price.

We might call this phenomenon "a double-edged sword".

Expect higher prices for gold this autumn, because it's the logical implication of the following:

 Investors and the general population are "asleep" during the summer and prices start moving more dynamical in autumn

 According to the latest reports, the US economy and a large number of economies in Europe have weakened, so we can expect worse 3rd quarter data - this will fuel gold's price

 QE 3 is most likely to happen after the US elections (which are held in November), but it's likely to occur during the events - the dollar's value will shrink, gold will increase

 The Greek economic crisis has an uncertain outcome, but it's highly likely that Greece will either leave the euro zone by itself or get "kicked out", which might stimulate the population to turn to gold instead of the drahma, weaker national currency to follow the euro

The most likely scenario therefore is: higher commodity prices this autumn.

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