Posted: 09 February 2012 1954 hrs
Article from channelnewsasia.com
SINGAPORE : Gold has regained its glitter as a safe-haven investment among investors, said analysts.
Investors began to make the switch since last month as major central banks say they are moving towards expansionary policy this year.
This means key currencies like US dollar and the euro are expected to weaken further, prompting investors to move into gold.
Gold prices have been creeping higher and is one of the best performing commodities so far this year.
Spot gold prices have gained 11 percent since the start the year.
In comparison,silver has gained 21.4 percent since January 1.
The bullish outlook on the prospects of gold have also led several analysts to issue more "buy" calls on the valuable commodity.
Analysts say any quantitative easing from central banks may also boost gold prices as the excess liquidity may likely make its way into gold investing.
This is because key currencies like the US dollar and the euro have weakened since the start of this year, down 4 percent and 1.5 percent respectively against the Singapore dollar.
Jim Rogers, Chairman, Rogers Holdings, said: "I still hold all my gold - if gold goes down more I will certainly buy more gold. Gold is going to be much, much higher over the next decade. Countries all over the world are debasing their currencies now, Singapore is not. But nearly every place else yes. I think I have to own some gold."
In fact, gold prices have remained steady at elevated levels over the last few months.
Last month, gold futures rose almost 11 percent, while combined net speculative positions climbed 38 percentage points percent to 188,000 contracts for the final week of January.
Analysts say the US Fed's latest move to hold interest rates low till late 2014 is also holding up gold prices.
Dominic Schnider, Head of Commodity Research, UBS Wealth Management Research, said: "Central banks will provide us with...sufficient liquidity. So all the balance sheet expansion from central banks will lead to a lot of interest into gold. Real assets remain something people like to have in their portfolios I think that should be sufficient to see higher prices. What do we target? US$2000 an ounce should be easily achieved (and) we actually expect prices to go above."
And later this month, analysts also expect the European Central Bank to expand its balance sheet to record levels with 3-year Long-Term Refinancing Operation.
This may also provide another boost for gold prices.
David Donora, Executive Director - Commodities, Threadneedle Asset Management, said: "Opportunity cost of holding gold is virtually zero and will continue so for an extended period of time. In addition, you have central banks buying gold and mine supply been limited in the last 10 years."
Meanwhile, a study by Credit Suisse and London Business School showed that gold is not a reliable hedge against inflation due to its volatile nature from its performance over 112 years.
The research showed the annualised real returns from gold is the same as capital appreciation in equities, of about 1.07 percent over 112 years in British pound term.
- CNA/ch
Article from channelnewsasia.com
