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Gold needs a big turnaround to hit $2,000 mark in 2012

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Gold needs a big turnaround to hit $2,000 mark in 2012

Post by Dirtbikepilot on Fri May 04, 2012 12:04 pm

Most analysts are of the view that only a big turnaround could help gold achieve the $2000 mark this year

LONDON(BullionStreet): Gold continued to revolve
around the five key factors from whom it wants to get the impetus to
move forward to the coveted $2000 mark.

They are China, India, Euro zone crisis, US economic situation and central banks buying.

Observers said India and China, two of the main drivers of gold's
surge to a record last year seem to be easing off, while central bank
buying, looks solid.

The US and Euro zone crisis continued to be in heavy volatile zone and cannaot always support the precious metal, they added.

Most analysts are of the view that only a big turnaround could help gold achieve the $2000 mark this year

However they said the case for gold to reverse its recent decline and
head toward the psychological $2,000 an ounce level is mainly built on
the possibility that Europe's sovereign debt crisis worsens and the
United States is forced to implement more quantitative easing in order
to spur economic growth.

While developments in the European and US economies are key potential
drivers of gold, it's important to note that they don't seem to be
driving the price right now.

It's more likely that gold is being more influenced by what's happening in China and India, analysts said.

China remained the key factor as there is little evidence of a
slowdown in actual gold demand, although given the government doesn't
formally state its imports; it's always a bit of a guessing game.

Another factor to look at in China is domestic output, which has also been growing strongly.

China, the world's largest gold miner, posted an 11 per cent gain in
February output over January to 26.87 tonnes, while total output for the
first two months was up eight per cent over the same period last year.

If 2012 output rises eight per cent over last year's, China will produce about 390 tonnes of gold, up from 2011′s 361 tonnes.

It's possible domestic supply may meet much of China's additional
demand, and if this is the case, then China may not be much of a factor
in driving the global gold price this year.

In India, depreciating rupee and harder economic times have curtailed gold buying.

Gold has gained 5.2 per cent in rupee terms this year and more than 4.6 per cent in US dollar terms.

Recently, India's gold buying festival, Akshaya Tritya failed to lift
gold sales as demand at the festival was likely 50 per cent lower at 10

India's gold imports are likely to slump by a similar margin to 655 tonnes in 2012 from a record 969 tonnes in 2011.

With Indian demand likely to be tempered, and China's demand likely
to show tepid growth, the case for any gains in physical demand seems to
rest mainly on central bank buying.

Central banks bought 437 tonnes last year and ANZ Banking Group
estimates that if the buying momentum of the first four months of 2012
is maintained, then official sector purchases could reach 600 tonnes
this year.

While this would indeed be a bullish factor, central bank buying could equally well ease if the world economy improves.

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