GOLD PRICES will rise further as a result of ongoing political and economic fears, according to an analyst at one of Australia's largest banks.
"On the basis of everything that is going wrong – a possible downgrade in the United States, the situation in Libya not getting any better, the general feeling about the global economic situation – I think gold is going to go higher," said London-based ANZ Bank analyst Peter Hillyard. "Gold isn't finished yet by a long shot."
Michael Cuggino, portfolio manager at Permanent Portfolio Funds, which manages $12.5 billion in mutual fund assets, believes there remain unanswered economic questions – especially over US sovereign debt – and that higher Gold Prices are "a continuation of a longer-term move being driven by worldwide monetary policies."
"Is the US debt ceiling going to be raised?" he asked. "If the debt ceiling is not raised, what happens to the US debt when it matures?"
Analysts around the world take the view that concerns over the Dollar are a primary driver of Gold Prices right now.
"The precious metal is increasingly being seen as an alternative investment as US Treasury numbers are showing that US debt cannot be repaid without a dollar debasement," said a note issued by the Commonwealth Bank of Australia
"Gold has been acting as a currency in its own right, added Simon Weeks, head of precious metals at the Bank of Nova Scotia. "That is why we are up at $1500."
Two US Federal Reserve officials, Janet Yellen and William Dudley, have both made comments this month that suggest the Fed may look to extend its loose monetary policies.
"I believe this accommodative policy stance is still appropriate because unemployment remains elevated, longer-run inflation expectations remain well anchored and measures of underlying inflation are somewhat low," said Yellen.
There was a note of caution for gold investors Wednesday when MKS, the Swiss precious metals and financial services group, published its daily report.
"Everything looks possible regarding gold now, as the $1500 level has been broken," it wrote. "However, with volatility strong, should there be a drop and correction, it could turn out to be quite steep. As a matter of fact, technically the rally will, at a certain point, lose a certain momentum and some investors will be willing to cash in their gains."
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