The price of gold is at an 11 month high and has rallied 14 percent since the start of the year, but analysts have told CNBC that it’s set to go even higher, hitting the $2,000 per ounce mark.
Martin Arnold, senior analyst at ETF Securities, told CNBC that it’s not just current monetary stimulus that is affecting its price.
“The lion’s share of demand is coming from the investment market, you’ve got currency debasement risk continuing,” he told CNBC Friday. “You’ve got the politicians in the euro zone playing their usual games, but we are starting to see some physical demand coming back from markets like India because going into the fourth quarter you’ve got a big festival and wedding season”
The Federal Reserveannounced on Sept. 13 that it will buy $40 billion of mortgage-backed securities per month in an attempt to incubate a housing market showing flickering signs of recovery.
Minutes were released on Thursday for when this quantitative easing (QE) was announced which underlined the Fed’s determination to use these policy actions.
Stimulus of this kind is often seen as a risk to currency price. And with gold traditionally having an inverse relationship to the dollar, gold has since rallied.
“If you’re seeing good demand for very good reasons then I don’t think there’s any reason not to be investing in gold,” Arnold said.
Bob Parker, senior advisor at Credit Suisse, agrees. He’s adamant that this latest round of QE will have more of an impact that any that have gone before.
“QE probably over the next since months to one year will become much more effective,” he told CNBC Friday, adding the reasons for his view. “I would argue that the bank deleveraging and the consumer deleveraging is actually now probably largely behind us and critically corporates are now actually starting to reduce their cash mountains.”
Both Parker and Arnold agreed that the price for gold is indeed higher, but it hasn't reached its peak.
“Martin and I have a forecast for the gold price, I think in excess of $2,000, if you agree with me, by January, February next year,” Parker said.