Gold investment prudent 'due to dollar-euro relationship'

An analyst at VM Group explained yesterday (December 17th) that gold prices will continue to rise as huge central bank debts continue to manifest themselves in the markets, Reuters reports.

Gold prices have increased by 15 per cent in the past eight days alone, while the dollar - with which it shares an inverse relationship - has plunged 12 per cent against the euro in the same period.

Now Matthew Turner has noted that the upward move which was expected some weeks ago as financial institutions wobbled and bailouts were issued around the world could now be taking place.

He told the news provider: "The primary factor is that the dollar is at 1.40 to the euro, which is an amazing turnaround.

"All this monetary easing and talk of printing money should have been good for gold, but that wasn't showing up. It was almost impossible when the dollar was rising."

The sheer level of debt which is set to unwind in the coming months appears to suggest that investing in gold is a wise strategy as the price of the yellow metal could rise further.

That is the view expressed recently by Dan Smith, an analyst at Standard Chartered, the third-largest bank in the UK by value.

"We are quite bullish for gold in the long term, primarily because we see the dollar weakening substantially on all this liquidity being pumped into the system," he noted.

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