Analysis

Volatile Gold Prices: A Demand Side Explanation and 2012 Outlook
March 29, 2012
| Economics
|
Summary
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Gold has disappointed investors over the last two months, falling from $1750 an ounce to $1680 an ounce, apparently reflecting a steadily improving global macro environment. This stands in sharp contrast to the last two years of gold price increases from approximately $900 an ounce to $1900 an ounce in September of 2011. Since the advent of the financial crisis, there has been huge volatility in the price of gold with prices rising by almost 100 percent. More gold price shifts appear to be on the horizon for 2012. In this analysis, LIGNET looks at global demand side reasons for volatile gold prices and where they may be heading this year.

The market early this year appeared to be building a consensus that the pressing problems and risks of 2011 were easing, if not being fully resolved in 2012. However, factors that pushed down the price of gold probably will be short-lived and may give way to significant price increases later this year due to global demand side factors.

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