Current Affairs

Gold prices remain stagnant

Between July and September of 2011 the price rocketed from $1,600 to $1,900, and one year later it is back to just below $1,600 per ounce.

Experts have been quizzed in a Reuters poll as to what has caused this stagnation, as their median spot price forecast at the beginning of the year was $1,765.

Ross Norman, chief executive of Sharps Pixley, a London bullion broker, believes there are three factors supporting the price of gold, whilst another three negative factors are serving to cancel out the positive.

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The three factors supporting gold prices are firstly that it is a wealth preserver, meaning it holds its value in the long term; secondly, China has supported the price both through private purchasing and ‘discreet buying’ through its central bank; and finally, central banks are being joined by emerging economies such as Argentina, Iran and Mexico.

The factors which are having a detrimental effect on gold prices include a fall-off in physical demand, a drop in sales in India and a strong US dollar.

With gold being denominated in dollars, a gain in the US currency makes gold less attractive to foreign buyers.

Vice president and director of global precious metals at TD Securities Steve Scacalossi said: “We have seen very little in the form of physical demand lately and even the usual Asian buyers have been notably absent.”

Image by Giorgio Monteforti

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