Gold has just completed the eleventh year of a bull market with the price of gold increasing around 400 per cent since 2001. There are many analysts and investment managers who believe that the positive outlook for the price of gold bullion will continue with further price rises expected during the course of 2012. Here are our top five reasons why we believe the price of gold could reach $2,000 per ounce or higher this coming year.
- Gold is often bought by investors who are buying the metal as a safe haven amid turmoil in the financial markets. And we certainly have turmoil in the financial markets at the moment. Many countries are struggling with massive debts and the Euro zone is arguably on the verge of collapse.
- It is going to take years for countries to sort out the financial problems they currently face. This in turn could lead to a rise in the price of gold as the financial uncertainty continues.
- We are seeing increased demand from central banks over the last couple of years. This is because central banks in several emerging economies are looking for alternatives to the US dollar. The banks are looking to invest in gold because it has a longer track record as a reliable store of value. Central banks bought 344 tons of gold in the first 11 months of 2011 a lot of it going to Turkey and Russia.
- There is a limited supply of gold and the amount of physical gold available is shrinking. This is partly due to investors from China and Asia who are unlikely to sell. It is also partly due to the renewed interest in buying gold coming from the central banks who will probably hold their gold for decades. This should have the effect of leading to higher gold prices.
- Inflation is currently leading to negative real interest rates in a lot of countries. This means that money in the bank is worth less and leads investors to buy gold as a way of preserving their wealth. If central banks print more money to try to fight inflation, the demand for gold will increase.
Gold prices can be quite volatile. Although there is a rising longterm trend we also see big upswings which are often followed by big downturns. Before investing in gold bullion you should do plenty of research to make sure it is the right investment for you.Find out more about how to invest in gold bullion at http://www.best-gold.co.uk. By Marie Andrews