Gold Price Will Hit New Highs in 2011 on US Rates, Euro Crisis & Chinese Inflation
Wholesale-market Gold Investment bullion-bar prices slipped back to an overnight low beneath $1380 per ounce Thursday lunchtime in London, trading 0.5% down for the week as world equities crept higher and the US Dollar eased back on the forex market.
Commodity prices were little changed, with crude oil holding above $88 per barrel.
Silver Bullion ticked back above $29 per ounce - a 30-year high when first breached four weeks ago.
[The] recent soaring costs of such materials as silver will force Japan's Fujifilm Corp. to raise its photographic film prices by 20% next month, it said this week.
Eastman Kodak Co. blamed falling profit margins on rising Silver Prices in Oct., while Tuesday this week saw medical-imagining firm Carestream Health Inc. hike its film prices by up to 25%.
We don't make [Silver Price] predictions here, but I've seen people say there's another five years to go, says Michael DiRienzo, executive director of the Washington-based Silver Institute to New York state's Rochester Democrat & Chronicle.
Silver Prices have risen 7-fold from a decade ago. Well over 50% of annual demand comes from industrial users. That compares with less than 15% in the gold market.
We expect gold to enter another bullish year in 2011, says Swiss refinery MKS's finance division in a note, as global economic uncertainties and inflation concerns will most probably boost Gold Investment further.
Every other currency could be at risk of losing...value.
Since 18 March 2009, the day that the [US] Fed announced it would engage in a money printing campaign, the Gold Price has soared 60%, notes the VM Group consultancy in London today.
The fact that it has not gone higher is simply a result of looming deflation, still the largest threat to the US economy, says VM in its monthly Precious Metals analysis for ABN Amro Bank.
Gold will rise for the tenth consecutive year this year and probably in 2011 too, to break new records.
Eurozone debt default is another cause of concern for wary investors, while Chinese Gold Investment demand is also growing strongly.
Today's Financial Times reports that At Beijing's largest gold shop, the queues to buy bullion mini bars have turned into scrums as...Chinese investors, worried about inflation, want in on the trend.
European finance ministers meantime meet today in Brussels to discuss a permanent mechanism for weaker states to avoid the soaring borrowing costs and deficit crises which have hit Greece and Ireland this year.
German chancellor Angela Merkel again denied overnight that she has any intention of helping create pan-Eurozone sovereign bonds, to be used for financing government deficits jointly.
Spanish bond buyers today demanded a 13-year record high of 5.44% per year to fund a €1.7 billion auction of 10-year debt.
German and UK government debt prices also slipped further, but US Treasury bond prices rallied, nudging the 10-year yield back down to 3.49%.
As long as real interest rates [after inflation] are low, gold should find buying support, says Walter de Wet at Standard Bank today, noting that - even as 10-year US Treasury bonds have jumped to 3.5% - inflation rates implied by bond-market prices has also jumped to a 7-month high at 2.3%.
This leaves the 10-year real interest rate still at a very low 1.2%.
Despite the savagery of the recent rise in yields, again let's put this into some sort of longerterm, bull market context, says Societe Generale strategist Albert Edwards.
[Ten-year US] yields would have to rise above 4.25% before the bond bull market [starting in 1981] was to be seriously challenged.
As for the equity market, says Edwards, The notion that we are in a sustainable economic recovery is as ludicrous as it was in 2005-2007. But investors are back on the dance floor, waltzing their way towards the next, inevitable implosion.
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