Top five gold trends for 2012

The movement of gold has gained momentum in the start of 2012 from US$1,615.05 ($NZ2,065) to $1,761.23 ($2,127.60) on 3 February 2012.

Here are some key trends that will help you keep track of the precious metal:

1. Risk aversity

Even with the price of gold increasing slowly this year and speculation of significant price movements as global financial crises progress, most analysts believe the price for physical gold and gold stocks will continue to rise.

As people become more risk averse, the historically anti-risk gold should start to perform against the riskier commodities and equities markets, helping to extend the gap with gold mining shares.

Gold equities enable quick, easy access to gold price movements, but concern around security of holdings in the paper-backed stocks may see a move from the riskier aspect of this type of gold ownership to the more secure, fundamental returns of physical gold.

2. NZ Dollar movements

One of the key questions buyers and sellers of gold in NZ dollars need to ask themselves is, “Where is our dollar heading to in 2012?” Currently it is strengthening quickly against most major currencies (USD, EUR, GBP) as global markets look for quick easy returns and stability in the long term. When the US dollar weakens against the NZ dollar, it is more favourable to sell gold to achieve a better rate.

3. Demand vs Supply

As demand for physical gold holdings increases, the ability to supply finished bullion product becomes a matter of cost and time. Manufacturing gold bars and coins of a purity suitable for the investment market isn’t a simple matter, nor is it particularly cheap.

In the financial crisis of 2007-2008, bullion supply went from approximately one week production turnaround to nearly six months, in line with rapidly increasing demand.

4. Changing customer landscape

The concept of buying physical gold is now limited not only to those within the financial markets arena. The demographic profile of physical gold buyers now crosses age gaps, household incomes, job capacity and gender. It seems everyone wants at least some exposure to gold.

5. Positive gains

Last year we saw the USD gold price increase for the 11th consecutive year. This is a trend that cannot be ignored. As the world looks towards New Zealand for investment stability, security and the flight to safety continues, it is no surprise that NZ Mint experienced one of the busiest years yet in 2011.

Let’s brace ourselves for another exciting year in the world of bullion trading.