Many Factors Influencing Gold's Positive Future


Fiscal and monetary policy reflation, flat mine supply and central bank demand are driving higher gold prices, according to DundeeWealth Economics chief economist Dr Martin Murenbeeld.

DundeeWealth Economics chief economist Dr. Martin Murenbeeld, as part of his presentation at the 2010 Mining Indaba (Feb. 1- 4), in Cape Town, says that some of the developments favoring higher gold prices include fiscal and monetary policy reflation, flat mine supply and central bank demand.

Some of the challenges for the price outlook include an expected exit strategy from policy reflation and an "inevitable U.S. dollar bottom." The stimulation of the economy through increased money supply, or by reducing taxes, has experienced a significant amount of interest, particularly as a result of the US government’s fiscal stimulus policies introduced to lessen the effect of the global financial downturn.

Murenbeeld says that there is a significant need for more resources, as emerging economies are growing rapidly and they need resources to sustain their growth. He says that a challenge to this growth is the restrictive, socialistic and anti-foreign development attitude of the mining industry in many countries. "This means that scarce mining knowledge will not easily diffuse into these economies," he adds.

He says that the challenges presented by an apparent rise in nationalism and anti-capitalism will hamper output and are not pro-development for host economies.

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