Fiscal Cliff Uncertainty Pushes Gold Prices Higher

newsGold prices have rebounded and are expected to rise in 2013. Concerns over the looming fiscal cliff have only fueled interest in the precious metal. The price of gold was up $9.09 to $1,658.35 per ounce Friday, as were the stock prices of several major gold mining companies.

Mitsubishi analyst Matthew Turner told his clients that “it is unclear how gold will react to the ongoing fiscal cliff talks,” but the market has made it clear. A Credit Suisse contended analyst commented, “The next few days will be important for gold. If the market is unable to rebound above important technical levels, the weakening chart picture could start to affect the longer-term outlook..”

Some of the mining companies whose stock price rose on the heels of the increase in gold prices include Agnico-Eagle Mines (AEM), Kinross Gold (KGC), and Newmont Mining (NEM). Shares of AEM were up 1.0% to $51.33, KGC went up 1.4% to $9.53, and NEM stock price increased by 1.4% to $44.70.

Some experts expect gold prices to go up next year which would mark a dozen years of price increases. However, not everyone is on the same page with respect to the outlook for gold prices.

UBS, for example predicts gold will climb to $1,900 per ounce. Capital Economics of London forecasts gold rising to $2,200 an ounce, or higher. Sterne Agee has projected a range from $1,750 to $1,800 per ounce over the next year and a half.

Commenting on factors that could impact gold prices, UBS analyst Edel Tully cited, “continued uncertainty around U.S. fiscal issues, and the view that major central banks will maintain loose monetary policies.”

Capital Economics issued a report this week in which it addressed numerous factors that affect gold prices. Among them were European regulators willingness to see gold as a very high quality liquid asset.

The report said, “Increased demand for gold to meet the tougher liquidity requirements could then go some way towards mitigating what might otherwise have been a large downside risk when the authorities do eventually take away the exceptional liquidity they have provided to the banking system.” Central banks play a central role in how things pan out for gold prices and they have been actively buying the precious metal. The Central bank bought nearly 100 metric tons in the third quarter according to Sterne Agee figures.

The firm said, “central banks continued to accumulate gold in October as well, with nearly 40 metric tons purchased in the month.” It went on to say, “accelerating deflationary trends, a stronger U.S. dollar, global central bank withdrawals of liquidity and a reversal of net bullion purchases, positive real interest rates, further delayed timing of development projects and higher than expected cost pressures could impact valuation.”

Barclays stated that the current fiscal cliff dilemma will have a negative impact on gold prices, regardless of how negotiations unfold, so it’s not just Americans who are watching the outcome closely.