Since reaching an all-time record high of $1,923 per ounce last September, the price of gold has not fared particularly well. The yellow metal has languished for most of 2012 amid considerable strength in the U.S. dollar, the ongoing European sovereign debt crisis, and the lack of further quantitative easing by the Federal Reserve.
Nonetheless, gold is due for a substantial rebound in the months ahead, according to analysts at HSBC. In a report published this morning, the firm forecasted that the yellow metal will climb to $1,900 per ounce by year-end.
“The big four central banks have printed around $9 trillion during the current crisis, roughly equivalent to the total value of gold ever mined…[but] despite this long-standing pedigree as a safe haven, gold has noticeably failed to rally in the present economic turmoil,” HSBC wrote (viaCNBC). “Periods of heightened euro zone concerns have typically led to equity market sell-offs, triggering margin-call-related selling in gold as investors seek to raise cash.”
“Also, U.S. dollar strength as the euro weakened in the face of persistent euro zone crises further weighed on gold [and] any safe-haven bid from the euro crisis has been offset by the associated rally in the U.S. dollar,” the firm added.
Despite these headwinds, HSBC contended that “We retain our bullish view on gold for the second half of 2012, buoyed by official sector demand and our expectations of U.S. dollar weakness as the market becomes more fixated on the currency’s value as the U.S. fiscal cliff story gains greater traction.”