Spot gold prices rose $171 per ounce, or 10.91 per cent, during the first month of 2012, while the price of silver went up by $5.35 per ounce, or 19.2 per cent, in the same period. The yellow metal is currently trading at $1,736 an ounce while the white metal is at $33.22 per ounce.
With the dollar index seeing a steady decline, the inverse correlation with precious metals is playing out its course, pushing prices up. Adding multiple variables to that simple equation is the ongoing financial negotiations and policy stalemate in Europe and the US, respectively.
“Metals prices posted further gains in the past week after the US Fed decided to keep rates exceptionally low, at least through late 2014, and fears about a Greek default faded,” said Dan Smith, Head of Metals Research at Standard Chartered bank, in his latest report titled ‘Metals – The rally continues, as Greek fears fade’.
“The fact that the US dollar (USD) index fell another 1.2 per cent week-on-week to its lowest level since mid-December provided additional support to gold and silver,” it said.
Going forward, the bank is supportive of higher gold and silver prices in the short term. “We look for higher prices as fundamentals remain supportive and Chinese imports are strong,” it says in its short-term outlook for gold. “US speculators have increased their net longs for a second week,” it added.
For silver, it maintains that “a weaker USD and surging US coin sales have helped to lift prices; still some upside [remains].”
The bank, along with a host of other major international players, expects gold to handsomely breach its previous lifetime highs of around $1,920 per ounce, and reckons that it will end 2012 near $2,000 per ounce. Standard Chartered is forecasting gold at $1,975/oz in the fourth quarter of this year (period average).
Morgan Stanley, on the other hand, forecasts the metal will climb to a record average $2,175 in 2013, analysts Peter Richardson and Joel Crane said in a report dated January 17, while in a January 13 report, Goldman Sachs reckoned that gold futures will advance to $1,940 an ounce in 12 months.
With the current rally not attributable to speculators, analysts maintain that further upside is likely. “For both gold and silver net long positions are still well short of their previous highs (gold is down 50 per cent from its August 2011 high, while silver is down 43 per cent), which seems to support further upside moves in both markets,” said Standard Chartered’s Smith.