Gold to Regain Its Glitter Reaching $2400/oz by Next Summer

on Oct 5, 2012
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Gold is shining brighter than ever and may even test its 1980 all-time high in real terms of $2,300 per ounce. BlackRock Gold & General’s fund manager Evy Hambro made a forecast which sees the price of gold reaching $2,400 per ounce within months, with the third round of US quantitative easing driving the bullion up, The Telegraph reported on 5 October 2012.

According to Hambro, who invests in both the physical metal and gold equities, the price of bullion could hit an all-time high of $2,400 per ounce by the middle of next summer. The BlackRock fund manager‘s latest report highlights the impact of the first round of US quantitative easing (QE1) on the yellow metal and looks into the prospects of a similar rally following the recent US Federal Reserve’s decision to step into a new round of monetary easing.

!m[BlackRocks’s Fund Manager Evy Hambro Says Quantitative Easing Could Cause Rally in Gold Price](/uploads/story/530/thumbs/pic1_inline.png)Extracts from Hambro’s report state: “The gold chart has turned decidedly bullish with the 50-day moving average rising above the 200-day moving average. The last time this happened was in February 2009, which interestingly was shortly after the implementation of QE1. Then, gold was $900/oz and never looked back. Should we witness a similar rally, prices would be taken to $2,400/oz by midsummer next year – and $1,760/oz would be the new floor.”

Hambro’s report also states that “if the third round of quantitative easing leads to further weakness of the US dollar, central banks may be prompted to switch more cash reserves into gold.” His estimate was backed up by data released earlier this week by the International Monetary Fund (IMF), revealing that the South Korean and Paraguayan central banks have recently added to gold reserves, with the former doubling bullion assets over the past year.

With gold’s appeal as an inflation hedge on the rise, the bullion has gained 13 per cent to $1,764 per ounce for the last four months. This steady gain has triggered a number of forecasts that the bullion’s performance over the next two years will be better than expected. According to the Bank of America Merrill Lynch, the price of the yellow metal may reach $2,000 per ounce within months and $3,000 per ounce by early 2014. At the end of September Citigroup raised its 2013 gold price forecast by 3.2 per cent. Yet, Citi remains more downbeat on the outlook for bullion, predicting an average price of $1,749 per ounce. This week, Deutsche Bank also cited the US central bank intervention and provision of further liquidity as unambiguously bullish for the precious metals sector and raised its 2013 price estimate for gold by 3 per cent to $2,113 per ounce.
On Friday (5 October 2012) gold hit an 11-month high of $1,795.69 an ounce, on a course for a fifth day of gains and a weekly climb of 1.2 per cent.

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