Gold rate forecasts can never be accurate to the T, but there are certain drivers that influence gold prices and help deduce the trends for 2013. The value of gold has skyrocketed consistently for 10 years, with the rate of increase being 15% toward the end of 2012 as compared to the beginning of the year.
What drives gold price trends?
Gold prices are driven by demand and supply. The demand for the yellow metal can be categorized into four sectors, namely- private investors, for technological requirements such as the dental sector, jewelry, and central banks.
More central banks started buying gold after 2010 due to the increase in gold buying patterns in developing nations. This trend is expected to continue in 2013 and even after.
Interestingly, the demand for gold jewelry has decreased in comparison to the rush to buy gold for investment purposes. Economic uncertainty, such as the current situation in the USA that reflects on its burgeoning deficit, is likely to keep the demand for gold jewelry low-key in 2013.
Gold for industrial use accounts for merely 10% of total global demand. The current high prices and the likelihood of an increase in investment demand well into 2013 may lessen its need for industrial purposes.
The investment sector is what largely drives gold price trends since it compromises over 40% of global demand. Post the financial crisis of 2007, the demand for gold as an investment option has been on a steady increase. More telling is the demand for physical, rather than paper gold, indicating that investors may opt for the former in 2013 as well.
Looking into 2013
The global economic climate, most notably, the degree of debts incurred by several private companies and Western governments, will have a telling impact on 2013 gold trends. Moreover, current political tensions between the USA and its allies and countries like Iran and Syria are likely to further cement gold’s status as a safe haven.
Gold is a precious rarity as an investment option, because it performs well during times of both inflation and deflation. In lieu of the deleveraging of many companies and economies, more and more people may diversify their investment portfolios and consider the merits of vaulted gold.