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Gold, Up in 2012, Looks to 2013

January 2, 2013 - 2012 brought the twelfth annual consecutive gain for gold, with prices up 7.1 percent to $1,674.95 per troy ounce as the New Year came in. Compare this to a 4.4 percent gain in copper, considered an economic indicator, and a 5.5 percent gain in the Dow Jones Industrial Index Average.

 

In early trade on Wednesday, gold tracked stocks and other commodities higher following an agreement by Congress to avert the U.S. fiscal cliff. Gold prices retreated slightly from gains topping 1 percent by mid-day with U.S. gold futures for February delivery up 0.89 percent, adding $14.90 to $1,690.70 per troy ounce. The spot price of gold added 0.85 percent, or $14.18, to $1,690.10 per troy ounce.

Gains in the gold market in recent years have been so strong that they put the current gains under scrutiny. With a 10.1 percent rise over the course of 2011 and a 30 percent gain in 2010, the rigor of the bull market at 7.1 percent for 2012 has been a question for investors, though analysts have stopped far short of calling a bear market even with the differential in gains.

Saxo Bank vice-president Ole Hansen said the deal does not seem like a long-term durable solution to the U.S. debt, but it’s given the gold market an excuse to move higher, helped by the dollar.

Edward Meir, metals analyst at brokerage INTL FC Stone, said the colossal failure of political will to get America’s fiscal house in order should provide fodder for the gold bugs to bid prices higher. He added they suspect gold will likely do better over the next few weeks.

Central bank policy has been a strong driver for the gains in the gold market since the economic crises of 2008. Following the reelection of U.S. President Barack Obama, markets priced in expectations that central bank policy under his administration would continue with accommodative monetary policy.

UBS, in its 2013 outlook, said the first quarter of 2013 has already suffered economic uncertainty on the outcome of the U.S fiscal cliff, warranting a defensive posture. The bank therefore thinks gold and platinum are an outright buy at present levels as both metals have very low supply elasticity and are key beneficiaries of loose monetary policy. In the case of gold, the outlook said, UBS still targets the level of $1,950 per troy ounce over the next three months.

 

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Jonathan Monroe

Senior Staff Writer - Gold-Bullion.org

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