Gold Will Drop to $1390 By Year-end And $1000 By 2013! Here’s Why

The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. The bank states there is nothing special about the nature of gold that makes it an ideal safe-haven asset because, were it not for its widely perceived role as just that, gold would behave like most commodities and rise in value during good economic times when demand for its industrial uses increases. Of course, gold has limited industrial uses and, if that were the only source of demand, the price would behave exactly as he suggests the quasi-financial role that gold has not quite a currency, but treated as if it were – which imparts it with a special status. Like all currencies, though, it can rise or fall depending on circumstances. Upon accepting that the world has somewhat arbitrarily assigned gold this role, we must review a number of factors that support gold’s price prior to predicting how these may develop in the year aheadAs Bew points out; since Lehman Brothers collapsed on Sept. 15, 2008, the price of gold has more than doubled. Demand from investors rose by 73% from 2007 to 2009 and another 24% in 2010, along with demand for other safe-haven assets like US treasuries and the Swiss franc. The yield on all such government debt – US, German, Japanese — has been historically low for much of the last three years with the exception of early 2011, when the community went risk-on and moved out of safe havens and into commodities and other riskier assets. Recently, though, sovereign debt has been very much back in the news and gold has benefited from its safe haven status as the euro has seemed on the point of collapse and the U.S. government seems unable to reach Indeed, in 2009-10 many were attracted to gold as a hedge against the potential for rising inflation as the global economies bounced back in an extremely low-interest and loose monetary environmentdoes not see any significant risk of a rise in inflation in the early stages of what will be a weak and prolonged recovery phase. They are expecting a gradual US recovery starting later this year and observe that Japan is already returning to some sense of normality after the natural disasters early this year.As interest rates rise, the attractions of financing investments in gold will be reduced compared to other asset classes. As a result, the bank expects the price of gold to average $1,390/troy ounce in the fourth quarter of 2011 and fall to $1,000/troy ounce by mid-2013… [providing] the recovery occurs as expected and inflation remains