Many experts do not believe that the recent sell-off in gold will continue much longer. According to Walter De Wet, head of commodities at Standard Bank, the metal is set to hit $1,900 an ounce towards the end of the year. For gold prices to rise central banks need to print more money and Euro zone uncertainty needs to settle.
By: Tom Mackenzie
Published: Wednesday, 16 May 2012
The recent sell-off in gold is unlikely to continue in the longer term, with the precious metal set to hit $1,900 an ounce towards the end of the year, according to Walter De Wet, head of commodities at Standard Bank.
"If the dollar [DXC1 81.515 0.135 (+0.17%) ] is strong and the euro [EUR=X 1.2723 -0.0007 (-0.05%) ] weak, gold trades lower, but ultimately it de-links especially when we get more money printing," De Wet told CNBC's "Closing Bell Europe." "Longer term we still think it’s going to go up."
De Wet says two things need to happen for gold [XAU= 1540.40 -3.70 (-0.24%) ] to rise. "First of all we need the uncertainty to settle," he said. "Like any other assets, gold sells off when people want liquidity."
Second, central banks need to start printing more money. "We see gold really as a currency in this type of environment and ultimately it does trade higher against a paper currency," he said.
De Wet sees physical demand for gold out of Asia rising on current price levels, with demand from India expected to pick up significantly in August and September "when seasonally they do start buying."
Gold ETF holdings have been flat over the past six months, De Wet said, adding: "but there’s a big shift from ETFs, for example, to bars and coins, especially in Asia. It’s not only the Asian central banks but the Asian investor too."
De Wet expects silver to continue to struggle and says rallies should be sold into as long as Chinese stockpiles remain high.
"As soon as Chinese stockpiles are lower, we see upside potential for the metal," he said. "However that is unlikely to happen before the fourth quarter."
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