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28 March 2024

Gold surges $200 in two months

Published
By Vicky Kapur

Gold price is up over 12 per cent in a 60-day period, with a section of analysts predicting that the yellow metal is set to break-off to new lifetime highs as the US Fed launches QE3 in right earnest.

Spot gold prices have risen more than $200 within two months, from $1,566 per troy ounce on July 10, 2012, to more than $1,777 on Friday, September 14, 2012. 

To borrow a line from Samsung (and Nokia), ‘it doesn’t take a genius’ to know that precious metals and commodity prices will benefit from any Fed action that promises to pump dollars to rev up a slowing US economic engine. 

But the big question is – which ones will rally more than others? As Walter de Wet, a precious metals strategist at Standard Bank, puts it in his daily report (dated September 14, 2012): “We have little doubt that most commodities will rally – in fact they have rallied already. The question is: which commodities are likely to rally more than others?” 

And the answer is…

“We pick gold, silver, Brent and aluminium.Our second tier pick on the back of QE would be platinum,” says de Wet.

The US Federal Reserve has announced that it will buy $40 billion of mortgage-backed debt per month until labour market conditions improve – that, to many investors worldwide, signals the beginning ofthe third tranche of America’s now-famous Quantitative Easing (QE) programme. 

In an interview with ET Now, an Indian news channel, Jim Walker, Founder & MD, Asianomics, says gold is one of the best bets for investors in the next few years. When asked ‘If a client walks up toyou with a million dollar cheque which you are free to invest for next 3 years but he wants 2 million back, how will you invest?’ Walker had no reservations in saying that he would put all his eggs in the golden basket. “I will put allin gold. Just buy gold,” is what he said.

When the channel asked him if he expected ‘gold to double in next 3 years’, he answered in one simple word: “Easily.”

Walker, who said he had been long on Indianstocks thus far, says that, given the current market conditions, he finds Indian stocks overpriced as a declining dollar will mean that oil and gold prices willsurge, further widening India’s budgetary deficit.