Gold to Hit $2500 in 2012

By Shayne Heffernan

April 20, 2011 5:11 PM GMT

Spot gold hit a high of $1,505.40 an ounce and was bid at $1,501.10 an ounce at 1403 GMT, against $1,493.90 late in New York on Tuesday. U.S. gold futures for June delivery rose $6.70 an ounce to $1,501.80.

Silver tracked gold higher, extending a stellar performance that has seen the grey metal outperform other precious metals this year. Silver hit a 31-year high at $44.79 an ounce and was later bid at $44.72 against $43.89.

Gold prices are up 5 percent in April and look set to extend gains as the metal's appeal as a haven from risk was boosted by talk that Greece may have to restructure its debt and Standard & Poor's threat to downgrade America's triple-A credit rating.

HCM research has calculated that an inflation adjusted high for Gold should be $US2500 an ounce in 2012, that amount would be equivalent to the 1980 prices that resulted from global instability and inflation.

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Worries about inflation had spurred steady physical demand from China, where the government has vowed to use all tools at its disposal, including bank reserve requirements, interest rates and the yuan's exchange rate, to wrestle inflation under control.

Gold's rise to record high only attracted light selling from Thailand and Indonesia, suggesting that investors remained bullish on the outlook. Premiums for gold bars were steady at between 70 cents and $US1 an ounce in Singapore.

While investors in the United States and Europe are seeing the metal chiefly as a safe store of value and a hedge against currency devaluation, stronger inflation and rising consumer incomes in China and India are also boosting demand there.

The dollar slid to its lowest in 15 months against the euro as the single currency was boosted by higher risk appetite and after a bond auction from Spain was well received by investors.

Weakness in the dollar boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies. Gold priced in euros and sterling remained off recent highs on Wednesday.

Platinum was at $1,800.99 an ounce against $1,761.50, while palladium was at $754.97 against $726.95.

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.