Many Reasons For Gold Prices Increasing
Gold prices are rising and are expected to rise much further over the next few months for a number of reasons. Gold reached over $1,700 per ounce on Thursday along with Platinum but this was not just a flash in the pan. There are many different factors that are set to push the price of gold up over $2,000 per ounce in the short term and many experts are predicting $2,500 to $2,800 is very achievable during this year.
Chinese New Year starts on Sunday, February 10th and the celebrations last for 15 days. Traditionally Chinese New Year is a time when there is a large amount of gold purchased in the form of both jewelry and bullion investment. A large increase in gold buying is expected over the next few weeks to meet the anticipated demand. China became the world’s largest buyer of gold in 2011 and although they produce about 350 tons of gold per year, they consume more than double that amount.
India is the world’s second largest market for gold. There are serious rumors that the Indian government intends to impose an increase to the import tax on gold by six percent later this year. This will obviously cause gold prices to go up as investors increase their gold investment holdings before the Indian government releases the bad news about the import duty. The effect of the increased gold buying in India is likely to start pushing the price of gold upwards throughout February and March.
The weakening of the US Dollar is expected to continue as we see sustained monetary easing. This will cause further devaluation of the dollar as the US Government faces big problems over the debt ceiling. Traditionally, as the US Dollar decreases in value the price of gold increases. This has been the driving force behind the large increases in the value of gold over a number of years.
Many countries around the world are concerned about the US Governments ability to pay its debts. Further unrest came to the forefront last week when Germany announced they would be more comfortable having their gold reserves in their home country rather than in the US Federal Reserve. Germany’s Audit Court told the Bundesbank to examine its gold assets in the US, saying their existence has never been verified. The Bundesbank have said that the returning gold will be examined.
A spokesman for the Bundesbank declined to comment about the cost involved for repatriation of their gold from the US to Germany only saying “it is economically tolerable for us”. The German gold is currently stored in New York for free but the German gold stored in the UK has a yearly charge of 500,000 Euros by the Bank of England. The Bundesbank has requested 300 tons of their gold be transferred from the Federal Reserve to Germany but they have said that German gold held by the Bank of England will remain unchanged.
These are just a few of the different factors which are likely to push the price of gold up over the next few months. The real indicator that a seriously large increase is imminent is if we can see a weekly close near to $1,700. As soon as this occurs we will be looking at a new resistance level of about $1,760 but if gold continues through that barrier then we will be looking at a whole new range of between $1,770 and $1797. Many experts are predicting that after we break through the $1,800 level the price of gold will rise sharply and most are talking about levels in excess of $2,400 later this year.