This Month in Gold – April 2012

Central Banks Vigorously Buying the Dip
Financial Times – At least one central bank, and likely more, took advantage of this month’s correction in gold to further diversify their reserve holdings away from the US dollar. According to several estimates from traders familiar with the purchases, the Bank for International Settlements – which buys gold on the open market for central banks, thereby preserving their anonymity – purchased four to six tons of the yellow metal, which at current prices is estimated to be worth between $250-300 million. “Central banks have definitely been looking at gold as an asset class much more closely ever since European central banks stopped selling,” remarked a senior gold banker.
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Barclays Expects Gold Rally in Q2
Reuters – “Worry Not!” proclaims banking giant Barclays Capital about this month’s correction in gold. By the second quarter, gold will have charged back up to $1,850 an ounce. Why? The same reason that has been driving up fiat-priced gold over the past decade: atrocious public policy. Specifically, analysts at Barclays Capital foresee “the resumption of the kind of currency debasement/inflation concerns that have been the big driver of gold and silver prices over the past 12 months.”
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Research Firm: Furious Rally for Gold Ahead
Financial Post – Julian Jessop, Chief Global Economist at Capital Economics, a leading economic research outfit, says the next leg up for gold will be nothing short of “furious.” Gold will bypass the psychologically significant $2,000 milestone and end the year at $2,200 an ounce, according to Jessop’s latest market analysis. Trouble in Europe is the most likely catalyst to cause gold to surge. “We continue to expect further defaults not only in Greece, but also elsewhere in the region, with at least one country abandoning the euro completely over the next two years.”
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Morgan Stanley: $2,175 Gold in 2013
Financial Post – Morgan Stanley is putting the pedal to the metal when it comes to buying gold in 2012. In particular, the bank expects the US Federal Reserve to launch QE3 in the coming months, a move that will be very bullish for the yellow metal. Morgan Stanley foresees gold prices rising to $1,845 in 2012 and $2,175 in 2013. Long-term, Morgan Stanley bases its sanguine forecast for gold on four pillars: the decline in price hedging by gold miners, fewer central bank sales among developed nations and the rise of developing nation central bank purchases, the lack of significant new supplies from gold miners in the coming years, and continued growth in investment demand.
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