Physical Gold Demand From Asia To Drive Prices Higher

  • Posted Tuesday, August 05, 2014 at 08:52 PM

TANGIBLE INVESTMENTS - Los Angeles - by James O'Dell - Gold and Silver prices were mixed on Tuesday with Gold adding $3.20 or 0.25 percent and trading at $1,291.50 an ounce, while Silver retreated $0.31 or 1.53 percent to trade at $19.87 an ounce, as the dollar hit eleven month highs on positive economic data to pressure the metals. TD Securities on Tuesday said that it sees the potential for the Gold price to rise in the shorter term and they base their expectations on the Fed's monetary policy.

U.S. interest rates remain near zero and they are likely to stay that way until the Federal Open Market Committee (FOMC) is convinced that the labor market has fully recovered, says TDS. Fed Chair Janet Yellen has made jobs in America one of her top concerns and is likely to keep monetary policy accommodative. “For that reason, a rout in the Gold market is unlikely,” said TDS.

Meanwhile, Peter Grant, of USAGOLD said on Monday that Gold, supported by higher demand from Asia, will reach $1,400 an ounce by the end of the year. Gold will extend its current rally based on accelerating inflation, says USAGOLD, and bullion will climb whether the Fed hikes interest rates or not, because any gains in borrowing costs will most likely be followed closely by rising consumer prices, says Grant.

Bullion dipped 3 percent in July at the very prospect of borrowing costs rising, but “If you look back over time, there are plenty of instances where rates have risen and Gold has risen as well,” said Grant, who has tracked precious metal for the past 28 years. Gold imports by India soared 65 percent in June and Grant believes it will be physical demand that actually drives the price of Gold higher.

“I’m primarily looking at the actual physical demand driving prices higher,” said Grant. “I also think inflation is going to pick up a little bit as I anticipate that energy prices are going to rise by year-end as well.”

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