U.S. fiscal cliff and dollar weakness also loom as price-boosting catalysts
"Two percent inflation is no spur to stocking up on
gold bars," notes Robin Bromby at The Australian newspaper, citing recent signs that rising prices appear to be in check -- that is, if you believe the official government calculations.
Never mind inflation, though. Other drivers for
gold remain. Bromby cites Julian Jessop of Capital Economics, who thinks that catalyst will be the eurozone crisis.
"We suspect that further gains for gold will require a new catalyst as the US dollar recovers more ground and inflation expectations drop back," he says in his latest note.
But that catalyst is close: a renewed escalation in the eurozone crisis and a revival of safe-haven demand.
The note neatly coincides with a warning this week from financier George Soros that if the European crisis continued it could lead to what he called a "lasting depression."
Capital's Jessop is not quite so apocalyptic, but raises again the prospect of Greece abandoning the euro. Greek bond yields are still more than 17 percent. There is also the looming "fiscal cliff" in the US with congress needing to act to prevent spending cuts and tax increases knee-capping the US economy.
In view of all this, Jessop says he remains comfortable with his forecast of gold around $US2000/oz in coming months.Meanwhile, Sumit Roy of
Hard Assets Investor thinks dollar weakness will come to the fore to give
gold a boost:
Lingering concerns about the eurozone have kept pressure on the euro currency, and thus provided some support for the U.S. dollar. But in our view, the dollar may be ready to make a significant push lower as market sentiment improves and risk appetite increases.
Ironically, the recent improvement in the U.S. economic data is bearish for the U.S. dollar, for the currency tends to depreciate during periods of economic optimism, as investors shift their assets from the safe haven of the dollar toward riskier currencies.
Bottom Line: Gold and silver are in a shallow correction due to a lack of bullish catalysts, but a potential move below the 78.5 level on the Dollar Index would mark a major breakdown for the U.S. currency, and would be extremely bullish for gold and silver.
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