Gold Hits New High In 2012

The price of Gold reached a new high last week as a result of various stimulus plans introduced by governments worldwide. In a previous post, we analyzed the effect of the Federal Reserve QE3 on Gold prices. The effect seems to have set in earlier than expected. This is helped partly by the Central European Bank keeping interest rates unchanged and buying bonds from debt ridden countries. This announcement pushed the gold price close to USD$1,800, the highest this year.

With the Federal Reserve and EU setting the pace, it is believed Asian behemoths such as China and Japan will follow suit. Monetary stimulus will drive the prices of gold higher. The weak US dollar and Middle East unrest will also give more upside to price of gold.

Its Only Speculation

However, investors should note that this surge in gold price is due to speculation instead of physical gold transaction. SPDR Gold Trust claimed its inventory rose to a record high of 1,334.44 tonnes as of last week. More trading activities are expected once the price crosses the $1,800 threshold.

The only headwind gold price faces at the moment is the improvement in the US jobs data as this will serve as a guide for the Fed to moderate monthly US$40 billion cash injection.

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