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Hold on to gold say HSBC

Tuesday, August 14, 2012

Investors are being urged to retain gold as an asset that will gain value towards the end of 2012. A new report from HSBC, predicts gold will buck current asset trends by benefiting from the political and economic turbulence in the U.S, brought about by pressure on the government to reach a decision on tax increases and spending cuts as the “fiscal cliff” deadline approaches.

“Economic uncertainty, geopolitical tensions and the uncertainty of the U.S. November elections are theoretically gold-bullish.” The report suggests, despite its current stall, gold prices should begin to increase by the end of the year, “when U.S. growth is poor and the dollar is weak. We expect prices to rally to above $1,900/oz by the end of the year. Patience is the most important commodity.” said Commodities Analysts at HSBC.

CNBC says the report predicts gold should retain its value as banks attempt to support their economic systems with quantitative easing. “The big four central banks have printed around $9 trillion during the current crisis, roughly equivalent to the total value of gold ever mined...(but) despite this long-standing pedigree as a safe haven, gold has noticeably failed to rally in the present economic turmoil.”

Unstable global currencies coupled with the euro-zone crisis are largely blamed for invoking a “contradictory dynamic” in investors’ reaction and perception of gold. “However, we retain our bullish view on gold for the second half of 2012, buoyed by official sector demand and our expectations of the U.S. dollar weakness as the market becomes more fixated on the currency’s value as the U.S. fiscal cliff story gains greater traction.”

For private investors looking to hedge against another banking crisis or to maximise the potential of the predicted gold price move, physical gold bars make the perfect portable, safe and secure investment.