Gold Breaks Through $1,900 Barrier with Speculation that it Could Reach $2,000 in September

The latest gold spot prices finally broke through $1,900 per ounce on August 22^nd as worries over the US economy and Eurozone crisis fueled another spur for gold buyers.

The price of the yellow, precious metal commodity has been impressive in 2011, increasing more than 1/3^rd price since the beginning of the year and by more than 13% in the last month.  While the gold price has dropped back down from $1,900 to $1880 (crashing 10% down to $1,700 within 48 hours during early September), speculators and analysts are still predicting it to break the $2,000 barrier by the end of September 2011. Since then, gold has regained its stronghold in the economic markets.

On 5^th September, gold prices breached their $1,880 resistance levels and as the candle stick charts rose to $1,905 at 13:30 UAE time.

The increasing demand for gold still reflects the dowdy positions of the world economies.  The release of the US government’s payroll data last Friday caused more concern for the inevitability of QE3 or more “quantitative easement.”  A HSBC analyst stated that the further hikes in gold price to beyond the $1,900 level are a likely response to the lack of employment growth in the US.

Meanwhile, a debate has now taken place between the long term future of gold between those foreseeing an increase past the $2,000 level and those taking a position that the gold bubble will burst eventually.

The case for gold breaking the $2,000 mark is that there is very poor economic data and growth around the world.  Both the US, UK, France, Italy and Germany have suffered poor economic results (the UK will publish their Retail Index growth tonight which is expected to show a decrease in growth since the +6% rates in July).  More quantitative easement in the US will also fuel demand for gold, while demand from the Chinese and Indian jewellery markets is normally highest towards the end of August and beginning of September (demand from these two markets will increase 17% this month).

A number of key analysts and bankers have all predicted huge growth rates for gold prices ranging from $2,000 up to $4,000 in the next few years.  Bank of America Merill Lynch states that the US government’s inability to regain it’s AAA credit rating will further fuel conditions for low growth, low interest rates and high liquidity, which will lead to another gold rally.  Furthermore. Central banks in South Korea, Asia, Mexico and Russia will all look to diversify their foreign reserves out of the US Dollar and into gold.

On the other side of the fence, analysts at RBS’s commodity strategies division say that the longer term, 12 month horizon for gold has much higher risks.  As with previous scenarios in history, the gold price could collapse again after strong episodes of growth like it did from 1980 – 2001 when the price of gold went from 850/oz to 256/oz.

In conclusion, it seems very likely that the price of gold will break the $2,000 - $2,500 by the end of the year or sooner and I really doubt that it’s going to fall before then when you consider this is the time of the year when the Indian and Chinese jewellery market demand for gold peaks.  Go to our homepage now to buy gold now and invest your savings in bullion.

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