Gold Retreats but Analysts Forecast Higher Prices

September 24, 2012 – Prices for gold bullion dropped to $1,757 per troy ounce on Monday morning in London, 1.7 percent off a 6-1/2 month high achieved in trading on Friday, as stocks, commodities, and the euro drifted and U.S. Treasures firmed amid signs of ongoing political stalemate hampering the debt crisis in Europe.

The price of silver bullion fell to $33.71 per troy ounce, 4 percent down from Friday’s highs.

Despite the falls, analysts continue to forecast higher prices for gold bullion.

Daniel Brebner, an analyst with Deutsche bank, said there is a lack of obvious catalysts to propel gold higher in the near term.

He added he believes we will see policy action over the next quarter both in Europe and in China that will support growth in both regions, keeping the gold price moving higher. He stated that Deutsche Bank’s projections place gold over $2,000 per troy ounce in the first half of next year.

UBS analyst Dominic Schnider said he is not worried at all about gold. In spite of the short-term retracement, he said, gold is still a buy.

Well-known hedge fund boss Ray Dalio, founder of Bridgewater Associates, told CNBC Friday that he thinks gold should be a portion of every one’s portfolio to some degree because it diversifies the portfolio.

He added that we have a situation right now in which we have too much debt and too much debt leads to money printing. Gold is the alternative to money, in Dalio’s analysis.

In addition to the situation in the U.S., Der Spiegel reported Sunday that Eurozone leaders may allow the new permanent bailout, the European Stability Mechanism, to utilize leverage in order to increase its capacity to bailout struggling Eurozone members.

The ESM is expected to come into effect on October 8, capitalized with 500 billion euro, which could be augmented with private sector investment to raise capacity to 2 trillion euro.

Steffen Kampeter, Germany’s deputy finance minister, said on Monday that if Europe decided to leverage the ESM they would involve the German Bundestag.

The previous bailout effort in Europe, the European Financial Stability Facility, was leveraged in order to absorb losses and give private sector investors partial loss prevention.

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