Provideo Financial Predicts That Despite An Inevitable ‘Gold Rush’ Slowdown, Gold Is Still A Sound Investment

Top Quote According to Provideo Financial analyst Lee Jacobs, gold could reach $1600 per ounce in 2011. End Quote
  • (1888PressRelease) March 31, 2011 - No one is pondering whether or not buyers have made money by purchasing gold in the past 10 years, yet it’s reasonable to question whether or not it’s time to begin selling a bit off. And it’s undoubtedly much more than honest to wonder if gold is the new unit of currency for maintaining wealth, or if markets like Forex are now at the front of fashionable investment circles.

    Sure, gold is up greater than fivefold during the past decade, a period of time in which the stock exchange crashed two times, along with the worldwide economy but, investors shouldn't neglect that the 10-20 years prior to that when gold produced weak earnings. It is actually unlikely that gold could replicate its overall previous performance over the next several years.

    Gold has typically had a low correlation to stocks, therefore it certainly offers diversity advantages to investors’ portfolios, but provided its present level, there is a considerable drawback because when the present political anxiety is solved, demand from customers will certainly decrease.

    Gold manufacturing is booming mainly as a result of interest in “investment” gold - not necessarily jewelry gold. Gold production increased about 3 % through this year. At the same time, interest in jewelry gold is actually dropping due to the increase in the buying price of gold. It reached $1,420 an ounce recently.

    Yes, traders tend to be challenging up the costs of gold due to the uncertainty in the Middle East, the raise in food costs, and also the fact that banking institutions will be flooded in funds. And everything which suggests that gold's health keeps increasing.

    For one, interest rates on a real basis are negative. Gold likes negative interest rates and steep yield curves, which is what we have right now.

    Second, structural issues, such as the U.S. federal deficit now at 11.5 percent of gross domestic product, plus a weak dollar against the Euro and Yuan, and sovereign debt problems are all positive for Gold.

    Investors need to protect themselves, and one way to achieve this is by investing in gold. A small amount of gold, because of its negative correlation with other assets, is a great risk-reducing tool.

    Despite the many factors that could lead to a decrease in this current “gold rush,” Provideo Financail analysts still believe that the upward trend for gold will continue over the next 18-36 months. “Gold has gone on quite a run, and we don’t think that it is anywhere near over. Eventually it will have to slow, but we don’t think that will happen in the next 12 months,” said analyst Lee Jacobs of Provideo Financial in Hong Kong. “China and India keep buying up gold, and China went so far as to formally recommend gold as a ‘value preservation’ mechanism to its citizens. There is too much momentum at the moment for the ride to end… I think that we will certainly see $1500 per ounce by the middle of the summer.”

    Jacobs also mentioned that he believes that gold could reach as high as $1600 per ounce in 2011, but is doubtful that it could maintain levels much in excess of that unless there were extenuating global economic circumstances.

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