Gold prices may rise above 20%

The recent rally in gold prices may ensure that gold prices re-tune to their annual rise of beyond 20 per cent, say analysts.

The ongoing rally is expected to land gold at a price anywhere between $1,100 (Dh4,040) and $1,200 an ounce and that would ensure that the average gold price of 2009 rises over the average gold price of 2008 by more than 20 per cent.

Average annual gold prices rose 20 per cent, 23 per cent and 30.9 per cent (as compared to the previous year) in 2005, 2006 and 2007; however, the rate of growth subsided to just 5.6 per cent in 2008. The recent spur in gold prices may ensure that gold resumes its high percentage growth rate.

"Gold prices are expected to touch $1100 an ounce by the end of 2010. And this will ensure that the rise in average price of 2009 over that 2008 is high," said Jeffrey Rhodes, CEO of Dubai-based INTL Commodities DMCC.

"There has always been a rise in gold prices annually. The rise of average annual price of gold may be higher this year because of the rally," said Anoop PS, Assistant Vice-President of Dubai- based JRG International.

Rhodes traced the bullish gold markets way back to 2001 when investments suddenly began flowing into the yellow metal.

"The bullion has risen from the levels of $260 an ounce in July 2001," said Rhodes. The bullion gradually assumed the respect of an alternative currency during the high inflation years of 2002 to 2006.

As the impacts of fiscal stimulus programmes of governments across the world begin to suggest the first signs of inflation, gold is back in demand again.

The year 2001 (and onwards) is also the period when Exchange Traded Funds (ETFs) began allowing investors a direct exposure to gold.

Gold was traded at $1007.10 an ounce yesterday.

The yellow metal is expected to find support at $970 an ounce if the current rally faces a serious snap.

It need to brave the resistance level of $1032 an ounce to rise further.

 

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