LONDON (Commodity Online): If anybody thought the recent slide in gold prices is an indication of the yellow metal's losing power to sustain above $1,200 per ounce level, think again.
According to analysts, gold prices are set to rise and rise in the coming months and years. They said gold prices are set to mark an eleventh year of gains in 2011 as investors seek refuge from an uncertain global economic outlook.
A poll of 55 analysts and traders showed expectations for gold prices in 2011 have risen nearly 7% to a median $1,228 an ounce, from a forecast of $1,150 in a similar survey conducted in January, said a report in India's Economic Times.
For 2010, expectations for gold have risen 4% to a median $1,197 an ounce from $1,150.50 in January, when market watchers were forecasting prices to rise this year before plateauing in 2011.
Gold prices hit a record $1,264.90 an ounce in late June, as concern over the ability of several European countries to finance their debt burdens destabilised the euro and sharpened volatility across financial markets, fuelling an investor flight into the perceived safe-haven asset.
Resurfacing concerns over another wave of recessionary conditions should keep investment demand for gold firm, as investors look to hedge against financial market volatility and vulnerability.
Several governments including Greece, Spain and Portugal have imposed austerity measures to cut their deficits, which has injected a degree of confidence into the equity markets, where investors expect earnings to paint a picture of improving business investment and economic growth. While this optimism has lessened the need of investors to protect their portfolios against more volatility with gold, fear of slowing overall growth has persisted.
So far this year, gold is up nearly 9% at around $1,190 an ounce, putting it on track for its tenth successive year of gains by end-2010 . Gold-backed exchange traded products, such as the SPDR Gold Trust - the largest of its kind - saw hefty inflows in April and May as investors bought the metal to protect against the eurozone sovereign debt crisis, while national mints reported strong demand for bullion bars and coins.
Longer term, the market could face headwinds that come with a sustained economic recovery as global interest rates could rise, denting the appeal of gold, a non-yield bearing asset. An analyst said the market is expected to derive strength from further economic pitfalls and the near-zero interest rates maintained by the US Federal Reserve.