Gold faces year of volatility

Over the past four years, gold has gained popularity in local and overseas markets as a safe-haven investment because of economic problems in the United Stats and the European debt crisis, neither of which has yet been clearly resolved. 

Hedge funds, central banks and individuals have all invested and speculated in gold prices, with a series of new highs achieved as a result.

Bullion climbed from $870 an ounce in 2008 to $1,100 in 2009, $1,400 in 2010 and $1,600 at the end of last year. 

Gold hit a new high of $1,920 in August and is projected to surpass $2,000 this year. 

Jitti Tangsitpakdee, president of the Gold Traders Association, said there was a chance for gold to touch its previous high of $1,922 in the current quarter. 

However, while the local price is expected to move in a range of Bt27,000-Bt28,000 per baht weight, said Jitti, it is unlikely to exceed Bt30,000. The local gold price is dependent on the strength of the Thai currency, which may not go as high as Bt32-Bt33 per US dollar. 

Early in the year, there could be a price correction due to profit-taking by investors and buying from funds because of the European financial and economic uncertainty and unclear US economic recovery.

“The gold price is very volatile now because of investors’ speculation in the global gold futures market. Although the gold price fell after the [decline in the] euro, investors have to wait and see solutions to the European problem and whether there will be QE3 [third round of quantitative easing in the US]. Such factors could move the gold price up, and it is expected to surpass the resistance level of $1,922 an ounce in the first quarter of 2012,” he said.

Kricharat Hirunyasiri, president of MTS Gold Mae Thongsuk Group, expects gold to be on an upward trend as the European debt woes have not yet ended, weakening the euro, and the US economy is still to recover.

Gold prices this year are estimated to exceed $2,000 an ounce because of its use as an inflation hedge and demand from investors and central banks in light of low interest rates and economic problems in the US and Europe. 

He said 2012 “is expected to see [global] economic growth of 1-2 per cent, dragged [down] by Europe and the US. Gold remains a safe haven for investors.” 

Pawan Nawawattanasub, vice president of YLG Bullion International, remains positive about gold prices in the long term. 

The precious metal is expected to make a correction and stay in a range of $1,460-$1,850 an ounce, or Bt21,400-Bt27,200 per baht weight (assuming Bt31 per US dollar), during the first three months of the year. 

It is expected to move sideways up in a range of $1,600–$2,000 an ounce, or Bt23,500-Bt29,370 per baht weight until the end of the year.

YLG expects price volatility to lure more investors into the gold market. A World Gold Council report said demand for gold investment had increased 33 per cent year on year in the third quarter of 2011.

Goldblex Holding Management said gold was likely to be a safe-haven asset only for some periods, as investors preferred holding cash. However, there is still demand from investors as it is cash-equivalent. 

The gold price is predicted to move in a range of $1,450-$1,850 an ounce in the first quarter, and $1,500-$1,700 through to the end of the year. 

The strategy for short- and long-term investment focuses on lowering risks and holding more cash. Movement on the global gold markets has to be on watch, Goldblex said.