2009 was the year of gold for investors, helping many profit during a major recession. Chaos in other investments led many to seek security in gold in 2009, although uncertainty is expected to decrease during 2010. See the following article from Commodity Online for more on this.
Even as the world gets ready to write the obituary for 2009, there are millions of investors across the globe who must be thanking gold for saving the year for them.
When the most unlucky year 2009 started on a very tragic note with recession looming large on the world, there was no immediate solutions visible for countries, especially the US, to tide over the crisis.
There was a fear of total collapse across the globe, particularly the developed world. The only ray of hope for the world was India and China, which were showing some signs of growth.
But, investors were panicked because they did not know where to keep their money. There were total chaos everywhere. Equities were down in the dumps, realty was collapsing like nine pins, banks just went phut. At a time when all your reliable sources of investment options go crazy what will an investor do? All sensible investors rushed to gold and parked their money in gold. That is how 2009 became the year of gold. From January 2009 to December 2009, there was no halt for the gold rush. From investors to bankers to big nations all bought gold as a safety haven.
In fact, the whole world had lost faith in everything else except gold. So, you saw news that Reserve Bank of India buying 200 tonnes of IMF gold, Sri Lanka’s central bank purchasing gold from IMF and even Russia’s bank bought the yellow metal as a safety option.
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The dollar’s fall added to gold’s glory. After the strengthening of the gold price by more than 20% – at one stage by 40% – since January, analysts were not sure about the fate of the metal in 2010.
The yellow precious metal has climbed steadily through the year to end at 24% stronger than it began. Starting the year at a London fix of $874.50 an ounce, gold rallied through $1200/oz to hit a high of $1226.60 early December.
Last week, the metal was more than $140 lower at a fix of $1085.25.
If you consider these factors, investors may not be very happy to know that gold may not be as good an investment option in 2010. Analysts say the catalyst for the gold price surge by the end of the year was the Indian central bank’s purchase of 200 tonnes of IMF, and the perception that central banks were deserting the US dollar and shifting their holdings into gold.
Near-term risk for gold at the moment remains very much on the downside. So analysts predict that gold will be around $1000/oz-to- $1100/oz band in the next six months.
However, there are optimists who say gold prices will hover around $1400 to $1450 in the second quarter of 2010.
And if you consider other factors like the fear among investors, the level of uncertainty is less at the beginning of 2010 whereas at the beginning of 2009 there was chaos all around.
So, this time equities are performing okay and banks have stabilized their operations and things are moving in a systematic way rather than the 2009 panic situation.
Where there is order and system, gold is unlikely to perform well. As I said in an earlier article gold is always a lover of tragedies and it cashes in on chaos. But 2010 doesn’t seem to be an ideal year for gold as the world is heading for a prosperous new year unlike the chaotic 2009.
Will 2010 take the sheen off gold? Most likely!
This article has been republished from Commodity Online. You can also view this article at Commodity Online, a commodity news and analysis site.