Gold rose above $1,420 an ounce coming into 2011 within 1 percent of its record high, and silver and palladium hit multi-year peaks, driven by pent-up demand on the first trading day of 2011.
While a firm dollar is limiting gains, expectations for more bad news on euro zone debt, concerns over potential inflation in developing economies and an increased focus on the U.S. deficit are set to maintain surging demand for gold, analysts said.
Pradeep Unni, senior analyst at Richcomm Global Services in Dubai, said fresh highs in gold were “likely” this year after the metal was becalmed over the Christmas holidays, with an initial target seen at $1,455-$1,480.
“Gold (steps) into the New Year with all its current fundamentals intact…. sovereign debt risk, macro uncertainty, concerns over currency stability, medium-term inflation fears as the U.S. Federal Reserve implements Quantitative Easing II, geopolitical tensions and low interest rates.”
Spot gold was bid at $1,420.40 an ounce at 1035 GMT (6:35 a.m. ET), against $1,419.45 late in New York on Friday. The precious metal hit a record $1,430.95 an ounce in December. European trade is expected to remain quiet, with London still on holiday.
U.S. gold futures for February delivery eased 40 cents an ounce to $1,421.00.
Bruce Krasting, former hedge fund manager predicts, that “volatility is going up across the board. If you have the stomach for the swings that are coming across all markets there is a ton of money to be made; balls and timing are all that are necessary.
Gold will be higher a year from now but off its peak. At some time in the fall, gold will be near 1,800 and the New York Times will do a front-page story that gold is on its way to 2,000. That will be the high point of the year.” So watch out you skeptics…cause spot silver has already risen to 30 year peak of 30.72 an ounce higher with our short positioned, Copper right behind as one of the oldest metals used in the development of civilization.
And, copper will continue to rise. This metal will benefit as the poor man’s gold. Why buy an ounce of something for $1,600 when you can have a whole pound of something else for only $5? The logic is compelling only because there is no logic. Increasingly, it will become understood that money does not hold value, but gold, silver and copper does and will.
These three metals remind me of the parable about the three men and the elephant, who had never seen an elephant before and were blindfolded, then asked to describe the new animal based on what they could perceive by touch. One man felt the trunk and said “It seems to be a large snake.” The second man felt the side of the elephant and said “It seems to be built like a wall.” The third man felt a leg and said “It seems to be built like a tree.” Neither had the ‘big picture,’ “As the central banks stimulate their economies for 2011, the ‘big picture’ will be revealed”,” says Regal Assets, “as it will only add fuel to the fire of the growing anxiety over rising inflation, and again bode well for gold.
Gold as a Reserve Currency
“Combining the fundamental factors discussed here and technical signals,” said Krasting, “the euro could break below $1.25 or even $1.20 sometime this year, which could drive gold up towards $1,600 levels. It is worth noting that gold priced in Euros has risen more than 38% so far in 2010, reaching a new record high above €34,475 per kilo, far outpacing gold’s nominal price gain (in dollars) of around 28%.”
“So in a way, gold is treated almost like a second reserve currency, replacing the Euro, and you would have gotten a better return getting into gold via the Euro. If the US dollar shows strength then gold will go to $2000/ounce. If the US dollar shows weakness it will go to $3000/ounce. It clearly points the way to invest, is in gold, which is the safest investment for 2011,” he added.
So, to recap, with the QE2, unemployment, foreclosures, geopolitical chaos and huge global inflation that will all contribute to a strong physical demand for gold, one needs to peak in on silver, which is already inching towards its 30-year peak supported by the strength in industrial metals such as copper. “Copper prices have been very firm, supporting silver as well as palladium,” added Regal Assets, “and that short-covering in silver also helped push prices higher. We expect silver to trade in the range of $30 to $35 this year, with $40 as a potential target. Buying silver isn’t just a way to back up your investments in the New Year. It’s now a profit play, too. And you could be earning real gains with the other precious metal alongside gold. The silver market is small. But the profits aren’t. You can turn silver into golden gains!” Call Regal Assets today, and you’ll have a great year!
