The value of gold has increased around 30% this year which is a
bit more than central banks and other official bodies expected but they
are usually rather modest with their predictions. Most independent
analysts have said that the price will be between $1400 and $1500 per
ounce by the end of the year and that is where we are now.
The main reasons behind the bull-run have been the European Sovereign debt issues and quantitative easing in the U.S. Also increasing investment demand in Asia with lacking new supply has pushed the price to record levels. As more institutions and hedge funds are starting to in invest in gold the lack of new supply might start causing problems in the future. Big institutions are buying from the same market as central banks and as the IMF can only sell 403.3 tonne per annum it is likely that some of the big players have to start using open markets to buy gold.
Presently it looks like that banks are not even considering raising interest rates in the near future which will drive people to put their money in something tangible, such as gold bullion. As more private investors are getting interested in investing in gold, the mints are struggling to keep up with the demand and the price of smaller bullions and coins is likely to rise even faster than other gold related investments.
The latest comment from both of the most problematic economic regions, the U.S and Europe, are suggesting that they are prepared to introduce more quantitative easing in 2011 if and when the economy will continue to struggle.
The issue with quantitative easing is that the money is not going where it should be. It should go down to small and medium size businesses to help them to get loans more easily and this way create more new jobs. Currently the money is just going from central banks to commercial banks and it is only benefitting stock markets and other investment institutions. This keeps investors happy but is not solving any of the issues which are causing the current situation.
The issues occurred when banks started lending money to people who couldn't pay it back and now governments are providing cheap money to banks helping them to plug holes in their balance sheets. The banks are getting away Scott free and the tax payers are left alone to pay the bill.
2011 looks yet another gold positive year as none of the issues that encouraged people to buy gold in 2010 have been solved and in fact more have been added as the domino has started to collapse. It is likely that there will be more bail outs in the Euro zone as more nations have to admit that their banking systems are on edge of a meltdown. The FED probably has to introduce one or more new rounds of quantitative easing as the U.S economy will keep slacking and without new fiscal stimulus the country will face deflation which would be even worse than the inflation following the quantitative easing.
In a nutshell we will probably see a lot more volatility in the gold price than we are used to in 2011 but there are not any valid reasons why the bull-run would end before the problems mentioned earlier are solved.
The main reasons behind the bull-run have been the European Sovereign debt issues and quantitative easing in the U.S. Also increasing investment demand in Asia with lacking new supply has pushed the price to record levels. As more institutions and hedge funds are starting to in invest in gold the lack of new supply might start causing problems in the future. Big institutions are buying from the same market as central banks and as the IMF can only sell 403.3 tonne per annum it is likely that some of the big players have to start using open markets to buy gold.
Presently it looks like that banks are not even considering raising interest rates in the near future which will drive people to put their money in something tangible, such as gold bullion. As more private investors are getting interested in investing in gold, the mints are struggling to keep up with the demand and the price of smaller bullions and coins is likely to rise even faster than other gold related investments.
The latest comment from both of the most problematic economic regions, the U.S and Europe, are suggesting that they are prepared to introduce more quantitative easing in 2011 if and when the economy will continue to struggle.
The issue with quantitative easing is that the money is not going where it should be. It should go down to small and medium size businesses to help them to get loans more easily and this way create more new jobs. Currently the money is just going from central banks to commercial banks and it is only benefitting stock markets and other investment institutions. This keeps investors happy but is not solving any of the issues which are causing the current situation.
The issues occurred when banks started lending money to people who couldn't pay it back and now governments are providing cheap money to banks helping them to plug holes in their balance sheets. The banks are getting away Scott free and the tax payers are left alone to pay the bill.
2011 looks yet another gold positive year as none of the issues that encouraged people to buy gold in 2010 have been solved and in fact more have been added as the domino has started to collapse. It is likely that there will be more bail outs in the Euro zone as more nations have to admit that their banking systems are on edge of a meltdown. The FED probably has to introduce one or more new rounds of quantitative easing as the U.S economy will keep slacking and without new fiscal stimulus the country will face deflation which would be even worse than the inflation following the quantitative easing.
In a nutshell we will probably see a lot more volatility in the gold price than we are used to in 2011 but there are not any valid reasons why the bull-run would end before the problems mentioned earlier are solved.
