Tags: cpm | gold

CPM's Christian: Gold Price Peaked Last Year

Wednesday, 28 March 2012 08:11 AM

Gold prices will remain high this year but won't reach peak levels in 2011, when bullion hit $1,920.70 an ounce, and will likely spend the next decade steady but not on the upswing, according to report from the CPM Group, a commodities research and investment banking firm.

More supply will come into the market, and so will more investors, a combination that will keep prices stable but not rising.

"We are looking for the price to stay above $1,500 this year and above $1,400 over the next few years," says Jeff Christian, Founder and Managing Director of the CPM Group, CNBC reports.

When gold hit its record high in August 2011, many had forecast even more gains, although by then, the metal had begun a less bullish trading pattern.

"We reached the cyclical peak later than we thought but by the end of the year the price was down and (gold) has been trading sideways," Christian says.

Gold now trades around $1,680 an ounce.

Gold often trades as a hedge to a weaker dollar, which has sent the metal soaring.

Lately, consensus is building that the U.S. economy is entering a phase of greater growth, which investors say could cap gold's rise.

Treasury yields have risen, meaning investors are selling safe U.S. government debt and have positioned themselves in risky but more rewarding equity plays.

Still, some experts pointed out that the U.S. economy showed signs of life at the beginning of 2010 and in 2011 only to retreat as the year progressed.

"There's a good chance we'll see a relapse in U.S. data since the economy is in a fragile recovery, which will lead to the speculation on more quantitative easing, and that is positive for gold," says Hou Xinqiang, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen, according to Reuters.

Under quantitative easing, the Federal Reserve buys bonds from banks in effort to stimulate the economy, with the dollar weakening and gold rising as a side effect.

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Wednesday, 28 March 2012 08:11 AM
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