Kaana Konya, former financial services advisor and Senior Portfolio Manager at City commodities broker, Tullett Brown recommends going for gold in 2012.
Having been on the rise for so long, the recent news that the price of gold had dropped caused panic amongst some investors in the precious metal. But now is not the time to panic, instead investors should be looking to capitalise on this drop as things will soon pick up.
The New Year is a time for reflection. Resolutions will be written and goals and plans for the year ahead made. It is a key time for investors too. The changing of the year provides an ideal opportunity to take a step back from your investment portfolio and have a think about the broader picture. It’s also useful to take a look back at 2011 as well and consider the trends in the markets and how you see them continuing in to 2012.
Much has obviously been made of the precious metals market over the last couple of years and gold in particular has grabbed the headlines. The price has shot up and when I consider the year just passed and the year ahead, despite the recent price dip, the ground remains fertile for investing in gold. I expect that in 2012 gold will reach $2000 per ounce and beyond.
There are grumblings from some corners that the gold price can’t continue in this manner and that the dip could get bigger. The facts however are this; the fundamentals which are responsible for the gold price increasing are still firmly in place heading in to 2012.
First and foremost the eurozone crisis is still far from reaching a resolution. Just this week the European Central Bank warned of a perilous year ahead as the sovereign debt crisis collides with slower economic growth and a dearth of market financing for banks.
There are sure to be many more twists and turns before we see an outcome which satisfies all and in the meantime the constant bailouts will need refinancing. This will take time and be done with newly printed paper money, driving up inflation and strengthening the price of gold.
Inflation is the key to the strength of investing in gold. Precious metals such as gold maintain their value over time whilst with inflation paper money can wipe the value of investments in the blink of an eye. Inflation in the UK shows no signs of stopping either. The UK’s Retail Price Index was measured at 5.2 per cent in November whilst the cost of goods and services continue to rise with train fares for instance rising by up to 8.1 per cent in the New Year.
Trends such as these show no signs of suddenly changing as we head in to 2012 and maintain my belief that there is still a lot of mileage in investing in gold and precious metals. As these trends continue into the new year the gold market will pick up and it will do so quickly, so investors must move fast to capitalise on this minor fall and buy, buy, buy!