The general return of confidence in the U.S. dollar has cut demand for gold as a hedge against a collapse in the U.S. currency, but economists at Capital Economics said they don’t expect that to hold back gold for much longer — and investment demand should help boost silver too.
“The monetary policy backdrop is highly favorable” for gold, they said in a quarterly report issued Tuesday.
“Interest rates are likely to stay low in the advanced economies for the foreseeable future, minimizing the opportunity cost of holding an asset like gold that pays no income.”
And in the event of a disorderly Greek default, gold is still likely to benefit more than any other currency, they said.
The Capital Economics economists expect gold prices to reach $2,500 an ounce no later than 2013 “as doubts over the survival of the euro come to a head.”
Meanwhile, silver, along with gold, should benefit from increased investment demand, they said, pointing out that U.S. Mint sales of silver coins have already more than quadrupled and sales of other silver coins have risen strongly.
“This investment has been fueled by distrust regarding paper currencies and by demand for safe havens from financial and other shocks,” the economists said. They expect silver prices to rise to around $46 an ounce by the end of 2013.
Silver futures SI1Z traded near $32 on Tuesday, while gold futures GC1Z traded around $1,650. – MarketWatch.com
on October 23, 2011. Filed under Precious metals.
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