Gold prices are expected to soar by year's end due to the downgrade of the US credit rating by Standard & Poor, say industry analysts. Gold hit an all-time high of roughly $1,750 an ounce by day's end of trading on Monday, but investment bank JP Morgan is speculating that price is too low when adjusted for inflation.
Investor fears and a rush for stable commodity investments could push gold prices as high as $2,500 an ounce by year's end say experts. The historic rise is a result of jittery markets around the world, particularly in Europe, where investors are seeking secure instruments which are less likely to return higher yields in a trade-off for guaranteed profits.
The flocking to gold by investors is being seen as a way to hedge against volatility in the world's stock markets. "At any given moment the world's central banks could step up in an effort to calm a frantic situation. Gold may have been a one-way bet for some investors but as the risks to growth reach boiling point, so too does the price of protecting against a volatile movement in either direction," said Andrew Wilkinson, a senior marketing analyst at Interactive Brokers Group.
Gold prices have risen steadily for decades, but because the US is not on the gold standard, and hasn't been since the Nixon administration, investors have usually been more attracted to commodities which guarantee a big payday in the short-term. It looks like gold will be the rising star of that philosophy as 2011 winds down and beyond. In other words, expect a new gold rush in 2012.
Image courtesy of Wikipedia