This Month in Gold – February 2012

Gold Again Above $1,700 on Fed’s Extended Zero-Rate Pledge
Reuters – Gold rallied hard on January 25, climbing 2.5% intraday to above $1,700 an ounce, on news that the Fed is extending its promise to maintain near-zero interest rates until late 2014. The Fed’s previous low-rate pledge was set to expire in mid-2013. The rally was gold’s biggest intraday gain in four months, and eclipsed the day’s modest gains in equities and other commodities. “Ben Bernanke is saying if you keep your money under your mattress, you lose out as the purchasing power of the US currency is being eroded,” remarks Axel Merk, the currency expert from Merk Funds.
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Gold Proves Safest as Goldman Forecasts Record
Bloomberg – US Treasuries step aside; the world’s oldest safe-haven asset is making a comeback. According to the Bloomberg Riskless Return Ranking, gold has outperformed all other commodities over the past five years when adjusted for volatility. The next-best performer has been gold’s junior sibling: silver. No surprise, then, that Goldman Sachs likes what it sees in the yellow metal market. The bank forecasts gold futures to climb to $1,940 an ounce in the next twelve months.
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China Gold Hoarding Turns More Traders Bullish
Bloomberg – Mainland China imported a record-breaking 85.7 tons of gold bullion via Hong Kong last October. It shattered that record and set a new one in November, importing a whopping 102.8 tons. China recently overtook India to become the world’s largest gold-jewelry market. The exploding imports via Hong Kong may also be a sign that the People’s Bank of China is looking to further diversify its reserve holdings. “The thing that’s caught people’s minds is the massive increase in Chinese buying,” says Ross Norman , CEO of Sharps Pixley Ltd., a bullion brokerage in London. “Gold has demonstrated time and time again its ability to hold purchasing power.”
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Sprott Positive on Gold
Reuters – Eric Sprott, the renowned Canadian fund manager, remains positive on precious metals for the coming year. Sprott anticipates gold will rally to $2,000 an ounce and beyond in 2012. Sprott is even more sanguine on silver, which he anticipates will rally to $50 an ounce and beyond. Sprott points to strong physical demand from mainland China and Turkey, where consumers are purchasing specie at record rates, as an important driver of the secular bull market in gold – in addition to the more fundamental litany of concerns about the global economy. Sprott prefers physical bullion as an asset choice, especially in light of the MF Global swindle.
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Miners See Gold Hitting $2,000 This Year
TheTelegraph(UK) – The folks digging the yellow metal up out of the ground see rosy times ahead. A survey by accounting giant PricewaterhouseCoopers (PwC) found that a preponderance of gold-mining company executives believe the price of gold will keep increasing in 2012 for a 12th consecutive year. The average prediction from the survey came in around $2,000 an ounce. Accordingly, gold mining companies have increased their price targets for this year by 20%. Miners underestimated their price targets in 2011, predicting the yellow metal would end the year at only $1,500 an ounce.
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