Gold Enters Period of Rising Prices as Currencies Depreciate


". . .gold could well be set for a further rise this year as investor sentiment remains strong."

The price of gold has seen a fairly strong recovery over the past few days—partly because perhaps fears for the euro have diminished, but almost certainly because there is a degree of nervousness out there about virtually all currencies, with gold providing some stability in a sea of quantitatively eased paper. There has also been some positive news too—there are signs that demand for gold bullion and gold jewelry is beginning to return in the traditional gold-buying areas—particularly India. Demand is also remains high in China. Gold mine production may be on the increase again, but only marginally so and not at a sufficiently level to change the overall supply/demand picture—his following several years of continuing decline.

Negative factors are that gold mining company dehedging will diminish sharply, but to an extent this is offset by the perception that central bank sales will be limited this year with perhaps the IMF's remaining 190+ tons being the only significant sale this year from the official sector—though it is early yet. If the IMF gold is purchased by official entities, then the subsequent boost to the gold price would likely take it back to last year's high point, and probably beyond.

Positive points perhaps outweigh negatives at the moment, though those who follow fundamentals in the sector will point out that the price is being held where it is purely by investment interest. Supply/demand analyses point to gold being in surplus.

As the world's finances remain a mess, it seems likely investor interest will continue as a safeguard against collapse elsewhere.

We are more likely than not entering a period where gold will continue to rise; it may not make you rich, but will protect your wealth from a drastic depreciation in currency and market values.

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