🪙 Gold Price Report 2013

Gold, more than any other precious metal, experiences significant price fluctuations from year to year. Numerous factors—both fundamental and psychological—affect the price of gold. Changes in supply and demand are driven by variables such as government policies, currency volatility, and investment strategies. Over the past decade, gold has been a strong performer, primarily due to: i) global economic uncertainty (especially in the US and Eurozone), and ii) rising demand from Asia for both jewelry and investment purposes. Gold prices have risen from $300 per ounce in 2000 to $1,665 per ounce as of February 2013.

Chart: 10-year Gold Price (February 2003-February 2013)

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🟡 Can Gold Remain Hot in 2013? – Some Insights from Expert Analysts

Can the gold rally continue in 2013? Could the price of gold reach as high as $1,900, or is it time for a significant correction that could bring it down to $1,500?

Many gold analysts argue that higher prices seem inevitable in 2013, and they believe that the lower end of the price range has already been reached. Others contend that gold has lost its momentum and is now overpriced compared to other commodities.

Some Insights from Experts

• Goldman Sachs analysts believe the gold rally will end in 2013, after peaking at around $1,850.

• BNP Paribas is forecasting new price highs in 2013 and 2014, with an average price of $1,750 for 2013.

• Bank of America’s research estimates an average gold price of $2,000 in 2013, with a strong move toward $2,400 in late 2014.

• Barclays analysts project a gold price around $1,800 in 2013 and expect the US Dollar to appreciate against the Euro.

The Role of the FED: High Inflation or Falling Unemployment Could Crush Gold Prices

Historically, gold prices are closely linked to the Fed's monetary policy. If US inflation rises above 2.0% (currently at 1.7%) or the unemployment rate falls below 6.5% (currently at 7.9%), the FED is expected to raise interest rates. In such a scenario, the US Dollar would likely strengthen, pushing gold prices down—potentially to $1,500. Since gold is priced in US Dollars, a stronger Dollar tends to weaken gold. Additionally, rising interest rates could prompt investors to sell gold in favor of higher-yielding assets.

Gold Supply in 2013 and the Role of China

Gold supply remained relatively stable over the past two years, exerting little influence on prices. According to analysts at Societe Generale, gold supply is expected to increase in both 2013 and 2014, driven primarily by rising production in China. China is actively acquiring foreign gold mines, just as it does with other key commodities. At the same time, consumer demand for gold in China is increasing, fueled by the growth of the middle class.

China’s Gold Reserves Compared to Other Economies

China’s gold reserves accounted for only 0.75% of its GDP in 2012. In comparison, the figure is 2.95% in the US, 9.50% in Switzerland, 5.50% in Germany, and 1.75% in India. This suggests a long-term opportunity for gold, as continued growth in Chinese demand may push prices higher.

Final Conclusion

The year 2013 may prove to be a pivotal one for the long-term trajectory of gold prices. If the FED continues its policy of economic easing, gold could reach new all-time highs—possibly $1,900 per ounce in 2013 and $2,100 in 2014. Conversely, if the FED determines that the US economy is strong enough to justify raising interest rates, gold prices could fall sharply—potentially to $1,500 in 2013.

□ Giorgos Protonotarios

Gold Report

TradingCenter.org (February 8, 2013)

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