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Should you buy gold at $1,200 an ounce?

Gold has been out of favour for years but some say it is time to re-enter.
November 21, 2014

The gold price has been on a downward trajectory since its peak of more than $1,800 (£1,147.74) an ounce in 2011, and it now trades at less than $1,200 an ounce. However, some analysts and investors argue that now may be a time to buy into the precious metal.

Tom Beckett, chief investment officer at Psigma Investment Management, expects the gold price to rise because of inflation and instability. "We believe that commodity prices are trading towards their lows and that the disinflationary forces will dissipate," he says. "The next support for Gold is the continued frenzied buying that is taking place by the consumers and central banks of emerging nations, particularly in Asia. Chinese demand will reportedly be 2,000 tonnes this year, equivalent to the whole annual output of the gold mining industry. And we do not expect any net selling from central banks, so their actions should be a continued prop for the gold price."

Mr Beckett also points out that gold is a useful diversifier in portfolios, as it has no obvious positive correlations with other asset classes. "With sentiment towards the metal at extremely bearish levels, it is a question of when and not if gold recovers," he adds. "In the short term the price can certainly fall further, but looking further out we expect gold to gain."

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