Rick Trotman, senior research analyst at MLV & Co., thinks that gold prices will do fine this year. "I don't expect a blockbuster year but ending the year between $1,700-$1,800 an ounce is realistic." Trotman does think that if Greece secures its second bailout and nails down a debt deal it would really depend on how good or bad that deal is. "If everyone is really happy with it, gold could trade down," he says, "but if it looks good then Portugal will decide to step up to the plate as well hoping to get a really good deal and gold would trade up on that."
Trotman also says gold will start looking to the U.S. presidential elections in November. Trotman suggests that if the polls keep leaning towards President Obama that that would be good for gold as "Democrats would spend a lot of money," as the dollar is devalued gold rises in response. "A Republican President would be bad for the price of gold," asserts Trotman.
James Steel, analyst at HSBC in a recent 2012 gold outlook report says that it's not just the U.S. going through an election cycle. "The political process will result in the election or selection of a hose of leaders in countries that represent more than 50% of the world's GDP." The political upheaval ranges from the U.S. to France to Egypt to Russia. "Uncertainty about changes in government may boost safe-haven demand for gold, in our view."
Another wild card playing out for gold Thursday was the news that inflation in China rose to a three month high at 4.5%. The higher reading is good for gold as it might push consumers into buying the precious metal as a safer place to invest as real interest rates are a negative 1%. However, the higher reading might also confirm the central bank's reluctance to lower interest rates, to firmly commit to a loose monetary policy.China has been pushing its banks to lend more into order to avoid a hard landing, or strong slowing of growth. M2 supply in the country, cash in circulation plus savings, checking and any travelers checks, grew 13.6% at the end of 2011 to 85.16 trillion yuan. This trend will need to continue to support strong gold buying. The country imported 427 tons of gold in 2011 and consumed 787 tons. Gold mining stocks were mixed Thursday. Kinross Gold (KGC - Get Report) was flat at $11.08 while Randgold Resources (GOLD - Get Report) was 0.41% higher at $115.03. Other gold stocks, Agnico-Eagle (AEM - Get Report) and Eldorado Gold (EGO - Get Report) were trading mixed at $35.07 and $13.96 respectively. .
-- Written by Alix Steel in New York.
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