Bet on gold as global economy struggles

Bet on gold as global economy struggles

Gold prices are set to rise in the short term because it is a safe haven for investors while the global economy remains shaky, says gold futures broker Ausiris.

Chief executive Boonlert Siripatvanich said the market expected a decision by the European Central Bank (ECB) today on whether it would pump money into its members' economies through a quantitative easing package, which would make the major world currency exchanges more volatile.

Mr Boonlert said the gold price broke its strong resistance line of $1,300 per ounce yesterday to test a seven-month high. The average gold price last year was $1,265 per ounce, with a peak of $1,390.

This year's average price should not be lower than last year as the euro zone economy remains weak and several countries are focusing on currency strategies, which could hurt their credibility, he said.

The gold price will rise even further in the long term if the ECB's money injections become regular for a set period, said Mr Boonlert.

"If the ECB really follows through on quantitative easing, it means the crisis is worse than expected. Other large economies such as the US are still unsteady, as the International Monetary Fund just reaffirmed its negative outlook by cutting the growth projections of these countries," he said.

But if the Federal Reserve decides to raise the interest rate, funds will shift back to the US money market to hunt for higher yields, said Mr Boonlert.

The trading volume for gold futures should be active this year after years stuck in the doldrums, he said. 

YLG Bullion Futures research noted gold is starting to reach the overbought zone after passing strong resistance at $1,285 per ounce yesterday. The next resistance line is $1,305 per ounce.

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