Gold has started 2012 with a bang, with prices up 11% in January alone. Gold's recent rally was ignited primarily by the Federal Reserve announcing it would keep interest rates low until late 2014. With the Fed virtually saying it would try to create inflation, gold was off to the races.
Around the globe, inflation is outpacing interest rates, leading to negative real interest rates. As people's money in the bank become literally worth less, investors flock to a hard asset like gold to preserve their wealth. Many are expecting inflation to pick up speed as central banks around the world gear up to fight deflation with more money printing.
Bulls also point to 11 years of gold price gains and argue that gold's late 2011 massacre was a normal correction. Central bank buying has also been robust, with the official sector buying 430 tons of gold in 2011. Turkey and Russia comprised the lion's share of buying.
Your one-stop shop for 2012 stock recommendations and market predictions.
India consumed only 878 tons of gold in 2011, a 8.4% drop from 2010. The Bombay Bullion Association believes that in the first quarter, India could import half of what it did in 2011. Indian demand has been ravaged by high interest rates and a devalued rupee, making gold more expensive to buy. High and volatile gold prices might also make it hard for India to ramp up its gold purchases despite its own recent rate cuts.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV