Traditionally, gold tends to take a bit of a breather during the summer season but this year might be a little different. The metal is likely to have a big summer, because of what is going on at a big picture geopolitical level. Gold price may surpass $1,650 an once this summer and even head towards $1,800 over the next three months.
A number of macroeconomic factors that are likely to have an influence on gold prices support such forecasts.
Firstly, much of the seasonality that is traditionally associated with the metal comes from Asia and even the Middle East, where gold purchasing is strongly related to the summer wedding season.
Gold market is changing fairly significantly during the last 2 years from traditional sources of demand into investment demand as an alternative to currencies. Investment demand is not seasonal, but is driven by the lack of luster of other assets. Fear, for example, it is a dominant theme in another of this summer’s big economic events – the end of quantitative easing in the U.S and worries about the country reaching its constitutionally mandated debt ceiling. Such events are likely to have a significant impact on the gold price, especially given the recent data that suggests, the U.S. economy could begin to recede once more.
The third reason for gold’s probable strong performance comes from Europe. There are an enormous number of economic problems in Europe, just as there are in United States. The conclusion investors should arrive at is that neither of these currencies are attractive and that is one of the underlying factors why analysts are bullish on the gold price.
Beyond the summer, the outlook for precious metals continues to remain positive, with natural setbacks on the way up. Corrections will take place and traders are advised to remain alerted, as such can be quick and violent.
The bull market in gold is not over, as re-establishment of the paper currency as not possible to happen any time soon.
