What Will Happen To Gold Prices in 2012?

The macroeconomic environment in 2012 is set for uncertainty, volatility and heightened anxiety. The EU will have to choose whether to print money or face a recession; US politics remain difficult and China and India's growth has slumped.

Gold prices hit six-month lows in December 2011 when they came under pressure from investors and banks seeking cash and weak physical demand from China. Since then they have steadily recovered but hovered below the 200-day moving average of $1,634. However yesterday (10/01/2012) gold finally broke this barrier which suggests gold may now gather some momentum and begin rising more steadily.

Murenbeeld, Chief Economist at Dundee Wealth Economics, sees monetary relation (or Quantitative Easing) as the key bullish factor for gold prices. If Europe is to avoid a recession it may well be required to launch a version of quantitative easing, if this happens, there is no telling where the gold price will end up.

In the short-term, the strength of the US Dollar is the most limiting factor for gold prices., However, it is fundamentally overvalued and as such Congress could force a 'devaluation' which would in turn be good for gold.

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Gold Rate: The 4 Most Important Factors That Influence the Gold Rate

1. Personal and Industrial Demand

The biggest factor influencing the gold rate is demand for jewellery, which consumes two thirds of the annual gold production. Here, India contributes 27% to the demand. India has a long history of an affinity to jewellery of this precious metal. China is lifting its restrictions to possess gold. This additionally drives up demand for gold.

2. Central Banks

Market participants with large gold reserves, such as central banks and mining companies can influence the gold price significantly. To reduce the level of the gold price, gold is sold (to provoke short sales). To increase the price, gold is either sold or production is stepped up.

3. Speculation and Trading

Of course, gold is not only in demand for further processing (industry) or just showing off (jewellery), but also for speculative motives. 

4. War and National Emergencies

The last factor influencing the gold rate is national emergencies and crooks in the government. On the one hand, war times reduce gold purchases, as people have less disposable income, and probably other priorities (for example to survive). On the other hand, in such extreme situations gold might bring a stable value into the portfolio, as the national currency is likely to suffer. 

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Six Factors That Affect The Global Price Of Gold

Are you one of the many who are worried about the negative effects of inflation?est inflation hedge. If you are planning to invest in gold whether bars, bullions or coins, it is important to know the different factors that drive the value of gold in the global market. Following are some of them.

Supply Versus Demand
Supply and demand are two very important factors that affect the price of gold and other goods and merchandise.

Gold Mining Production
The gold production is related to the first factor mentioned earlier. 

The Monetary Policies Of Central Banks
The one in charge of keeping the gold reserves are the central banks. 

Economic Volatility
The news of the unstable economy is not new. 

The US Dollar is a major factor that affects the gold price.

If you are on track regarding the global political arena you will see that the problems in Iraq and Afghanistan has affected the value of currencies and precious metals

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