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commoditiesBRIEFING


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0 18 Nov 06


“Gold buGs say that with the world (or at least the eu) GoinG to hell in a hand basket – the leGendary ‘safe haven’ metal is just takinG a breather before its next incline.”


and with our US economic outlook pointing for continued low levels of US real rates in 2012, we continue to recommend long trading positions in gold,” the bank said in a note to clients, adding that the Eurozone debt crisis could further push gold upwards. US Global Investors, a mutual fund


investment company, says negative real interest rates in the US will propel investors to seek gold for its perceived ‘safe haven’ qualities. Gold and the US greenback are


negatively correlated and it’s probably fair to say that much of the commodity price spike is due to the US Federal Reserve printing dollars with sheer abandon. So it’s no surprise that gold prices


18 Nov 07 18 Nov 08


have been reined in as the US dollar recently turned into a ‘safe haven’ due to the EU crisis and, paradoxically, the US downgrade. But French bank Société Générale


notes that the dollar’s safe haven tag has limited appeal as the Federal Reserve could embark on a third round of quantitative easing by the end of the year or early 2012. The bank has cut its outlook for gold,


but not by much. “For 2012, we now expect gold prices


to average $2,175 an ounce, versus $2,275 in the previous forecast.” In the short term, analysts expect a


burst of central bank buying and the holiday season to boost gold prices. Toronto Domino Bank, Canada’s second largest financial institution, does not sit on the fence when it comes to the prospects of gold: “We expect precious metals to be a top performer in 2012, with gold prices heading towards $2,100. History shows that easy monetary policy and economic/ financial stress are supportive for gold prices – and this environment is likely to persist throughout the next year,” the bank notes. In addition, the much touted love of


the Indian and Chinese consumer for gold should also ensure prices hold up.


18 Nov 09 18 Nov 10 18 Nov 11 But Indian jewellery demand was


down 26 per cent during the third quarter, which sends a contradictory signal that consumers are slowly being priced out, leaving only speculators jumping on the gold bandwagon. We can be certain that these investors will exit at the first sign of trouble. While it’s tough right now to find


analysts who are bearish on gold, investors would do well to move with caution. First, we are in a new era of global financial market volatility, which makes historical technical charts redundant. Markets have vacillated from ecstatic highs to depressing lows, and it is possible that a few key decisions in Washington and Brussels could dissipate the dark clouds hovering over the global economy, leaving gold with little cover. Second, if the global economy continues to meander, investors will be keen to take profits from their gold holdings to compensate for losses elsewhere, keeping prices in check. Third, as gold has risen 600 per


cent over ten years, even a mid-sized correction may not be unwarranted and may not signal the complete and utter decline of the precious metal. But investors who move in at current prices could find themselves staring down a cliff. ©alifarabia.com


Gulf BuSINESS / 42


$ once


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