Gold futures-2011

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GOLD

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  • 1. Gold Futures 2011Tuesday, 11 January 2011 17:58In 2010, we witnessed placing new records for gold, upside waves despite many conditions thatnormally cause a decrease in the price of gold.The high price of the U.S. dollar, increasing demand for higher-yields’ assets –stocks mainly-,and low levels of inflation in many countries, and risks of deflation in countries such as Japanand Switzerland, all of these reasons were supposed to cause a decline in the gold price,according to the usual relationship between the price of gold and inflation and between the goldprice and exchange rate for the dollar in financial markets, but in the end, we have seen goldflying very high.We start 2010 with optimism in the financial markets that was mixed with fears of Europeandebt crisis, 2010 entered with expectations that the international economy may witnessacceleration in growth, especially after the announcement that the global economy has comeout of the deepest economic recession and the worst since the period after World War II.However, we see that the sovereign debt crisis was the pivot of economic concerns and thepessimism in the financial markets spread more and more following the expectations of thereturn of this recession crisis in the European economies again.Not only Europeans crisis is the focus of the economic problems in 2010, but also we see thatU.S. economy in spite of its continued growth and recovery, but the weakness appears to beclear, while we see that the Federal remained concerned about the levels of unemployment thatrose and did not fall with the improvement in the U.S. economy, which pushed the U.S. Federalfinally to indicate that the growth is "non-enough " to lower the levels of unemployment.Japan has also witnessed tremendous pressure because of the high yen, while china had bigrole causing tensions in the international financial markets, where it’s extreme policies towardsmonetary and financial policy worried the observers of the international economy.Greece, Ireland, Spain and Italy all these nations feel the heat in the debt crisis, and althoughthe focus was on the Greece and Ireland, but we see that the features of the crisis are obviousin many other countries.Iran, with it’s political problems, beside declaring that they are buying assets from gold had amajor role also in pushing the price of gold to rise with the last few days of the June. And if wealso take a look to the political tensions in the two Koreas in recent months of 2010, we knowthat gold is also used to cover the risks of wars as well as the effects of political tensions on theinternational economy.When we review all 2010 Gold movements, we see that gold was waiting any opportunity to riseeven from a single effect, while ignoring the other factors. The main cause of this is the policiesof central banks around the world, and is the quantitative easing policy or similar policies as wellas low interest rates. And we must not forget the impact of the debt crisis in Europe and theturmoil in the growth prospects in the international economy.Talking about the coming 2011, it may be positive for gold if the economic conditions continue 1/2
  • 2. Gold Futures 2011Tuesday, 11 January 2011 17:58as they are now,  if the European debt crisis continued and the concerns about high levels ofinflation in Asian countries continued too, and if interest rates continued to stay at very lowlevels, all this may be a reason to see the continuation of the upward trend of gold.But we should know something important, is that the current price of gold between 1300.00 and1400.00 dollars, this price is a result of all the above mentioned variables, a war of currencies,quantitative easing, low interest rates, risks of high inflation in some countries and the risk ofcontraction in other countries, weaknesses in economic growth in many countries and the European debt crisis.Therefore, any increase or decrease in the risk of one of them, or disappearance of anyconcerns to any cause of the previously mentioned effects may have a significant impact on theprice of gold over the next year.Attention should be paid to an important issue, although we do not expect a bigger upside rallymore than what it was in 2009 or 2010, but in case a problem arises, we may see gold risesvery sharp again.At the end, we could expect a different year for 2011, talking about the high volatility more thanbeing special year going into one direction, whether it was up or down, despite we expect moreupside action, but we don’t think it’ll effect the whole year as it was in 2009 and 2010 2/2