NEW YORK, Dec. 8, 2010 /PRNewswire/ -- Jeffrey Nichols, Senior Economic Advisor to Rosland Capital (www.roslandcapital.com), had the following commentary based on recent market activity and the week ahead:
As of December 7, 2010, after a month-long correction -- what technicians call "base building" -- gold is on the move again, heading to $1500 an ounce, if not by year end then very likely during the early months of 2011. Whatever the timing of this milestone, gold investors will be popping the corks on New Year's Eve: After all, recent prices in the $1,400 to $1,430 range are up some 30 percent from the end of 2009. And, 2011 promises to be another stellar year for the yellow metal as gold's bullish drivers continue at full throttle.
Indeed, we expect gold will easily reach $2,000 an ounce in the next year or two ... and, longer term, $3,000 or higher seems quite likely.
Recently, gold's short-term drivers have been economic developments in the mature industrial economies:
First, a flight from the euro into U.S. dollars, reflecting fears that Europe's single currency may not survive in its present form, contributed to gold's November price retreat as the metal's typical inverse correlation with the dollar exchange rate held sway.
More recently, aggressive quantitative easing by both the Fed and the European Central Bank has attracted greater investor attention, raising expectations of inflation and currency depreciation, if not among a majority of financial market participants, by a small but growing cadre of investors who value gold as a risk-averse store of value.
Importantly, even a seemingly insignificant shift in portfolio preferences away from the relatively large U.S. dollar and euro financial markets into the much smaller world gold market may hardly cause a ripple in conventional asset prices but can propel the yellow metal sharply higher.
On both sides of the Atlantic, central bankers are reacting to dismal developments in their respective economies: In the United States, it is continuing signs of recession-like business conditions, especially persistently high unemployment; in Europe, it has been fear of sovereign default by Europe's peripheral fringe economies -- Ireland, Portugal, Spain, Italy, and even Belgium -- and the threat this poses to banks and financial market across the entire continent.
Physical Demand Remains Firm
Physical demand in key world gold markets -- especially China, India, and other Southeast Asian trading centers -- has remained remarkably firm despite the record price levels prevailing in recent days and weeks.
In the past few years, each time gold prices reached for the big round numbers -- $900, $1000, $1100, $1200, and $1300 -- buying interest diminished and a return flow of price-sensitive old scrap weighed heavily on the market. But now, even with prices once again at all-time highs, physical demands remain remarkably strong and very limited quantities of old scrap are coming back to the market.
This suggests not only a continuing price appreciation and revaluation of gold -- but also a mental re-evaluation and upward shift in expectations among many gold-market participants about the metal's future price.
If physical buying remains fairly firm -- as I believe it will -- we can expect that gold will soon be soaring to new all-time highs.
About Rosland Capital
Rosland Capital LLC is a leading precious metal asset firm based in Santa Monica, California that buys, sells, and trades all the popular forms of gold, silver, platinum, palladium and other precious metals. Founded in 2008, Rosland Capital strives to educate the public on the benefits of investing in gold bullion, numismatic gold coins, silver, platinum, palladium, and other precious metals. For more information please visit www.roslandcapital.com.
About Jeffrey Nichols
Jeffrey Nichols, Managing Director of American Precious Metals Advisors and Senior Economic Advisor to Rosland Capital, has been a leading precious metals economist for over 25 years. His clients have included central banks, mining companies, national mints, investment funds, trading firms, jewelry manufacturers and others with an interest in precious metals markets.
SOURCE Rosland Capital LLC