Goldman Sachs says gold (GLD, quote) is still on the way up, and is likely to hit a new high this year. How high it goes depends on both monetary policy and the Chinese appetite for shiny metals.
Gold prices have been rising for 11 years, and there seems to be no danger they will drop any time soon. According to the Goldman Sachs analysts, the gauge of future price swings is near a five month low.
On January 13, a Goldman Sachs report predicted that gold futures would reach $1,940 per ounce in the next twelve months. Morgan Stanley is equally bullish, forecasting an average price of $2,175 in 2013.
Most analysts attribute the rise of gold to loose monetary policies pursued by the Federal Reserve and other governments around the world. Both central banks and investors have been buying heavily. Reuters reports that “Central banks bought more bullion last year than at any time since 1964.”
Don’t count out the demand from China and India, though. The two nations account for 40% to 50% of gold purchases, and goldprice.org writer Michael Moore says China is expected to overtake India as the world’s top gold consumer soon.
According to Moore, “This massive demand by Chinese investors keen to preserve their wealth is going to have a significant effect on the gold price in the coming years.”