The United States alone looks set to increase their debt by nine trillion dollars over the next decade, warns Baumann – which doesn’t exactly help to instill confidence in the dollar, given their current record deficit. Gold will always benefit from any percieved weaknesses in the dollar, as it is considered to be the alternative global currency, so it will continue to rise in price compared to all currencies, as long as central banks continue their policies of low interest rates and increasing currency devaluation. International crises are another source of price increases.
The price of gold is in an upwards trend, however a price around 1.400 US dollars currently seems excessive, warns Baumann. The primary price driver is the current development of the US dollar, which in turn is largely influenced by the current plans the Federal Bank has commited to (Quantative Easing Part 2). If we heed to the old exchange mantra “Buy the rumour – sell the fact”, we should expect some dissappointment in the market if the Fed doesn’t buy assets from the market as expected. “We are witnessing the highest level of USD shorts we’ve ever seen, i.e. the majority of investors are positioned for a dollar decline that has already taken place internationally. Any strength that the dollar shows would lead to investors adjusting their positions, which would in turn further strengthen the dollar and negatively impact the price of gold”, says Baumann.

To put it bluntly: The price of gold could of course fall by the end of the year – but that isn’t necessarily going to happen. Another indicator that is causing some investors to hold back from additional gold purchases is the large amount of coverage gold investments are getting in the media. Everywhere you turn, you see gold traders sprouting up, offering to buy up consumer’s gold and offering “Gold ATMs”. Largely due to these trends, Volksbank Investments currently is only partially recommending additional new investments in gold fonds, gold ETFs and goldmine shares. If anything, it’s advisable to secure any existing investments, depending on the type of investment and your current investment potential.